500,000-ruble note will lighten purses of wealthy Russians Bill is sign of stability of post-Soviet economy

March 17, 1997|By Clara Germani | Clara Germani,SUN FOREIGN STAFF

MOSCOW -- It was bad enough when retiree Natalya Victorovna heard a mother scolding her child the other day for picking up a "worthless" 50-ruble coin -- the equivalent of a quarter of her salary as an engineer just five years ago.

But what really makes her head spin is the nation's new 500,000-ruble note -- once equal to the whole payroll of her engineering department.

The new ruble denomination, to start circulating today, is about equal to $89. It is a sort of benchmark of the post-Soviet economy.

For many Russians whose pay is low and who often go unpaid for months at a time, the 500,000-ruble note will be a reminder of hardship.

For those who have prospered in the post-Soviet era, it may only be small change. But it will reduce unsightly wallet bulge.

For economists, the calm reception of the bill is a small signal of economic stabilization. Inflation since the collapse of the Soviet Union raged at 2,500 percent in 1992, 840 percent in 1993, 215 percent in 1994, and 131 percent in 1995.

And for everyone, it will be a crisp new spur to nostalgic comparisons such as the 1980s' 5,000-ruble new car and the 1990s' 5,000-ruble loaf of bread.

"This bill is for rich New Russians," says Yuri Vasilev, 65, an English teacher. "I earn about 700,000 rubles a month [$125], when I do get paid. I don't spend 500,000 rubles on any one thing. What am I going to do with a 500,000-ruble bill except have trouble finding someone to break it for me?"

Indeed, says economist Vladimir Litvinov of the All-Russian Center of Living Standards, the large denomination is going to be for prosperous Russians who buy expensive things.

And that means mainly people in Moscow or other large cities where the average salary is about 2.5 million rubles a month vs. 800,000 rubles a month for those in the provinces.

The new bill is necessary, the Central Bank says, because wages have grown in nominal ruble terms to the point that, in this nearly cash-only nation, wallets literally bulge with excess paper money.

Most nations make the highest denomination of bank note equal to about half the average national monthly wage, says Natalya Khomenko, a Russian Central Bank spokeswoman. Now that the average wage nationwide equals about 1.1 million rubles a month, or $196, she says, the previous highest denomination of 100,000 rubles, or $18, wasn't nearly enough.

Also, she says, the bank invested heavily in new devices to stop counterfeiters. One feature of the bill is a Central Bank logo that changes color when viewed from different angles.

"This is not a huge note, but what's important about it is, it indicates the Central Bank is not going for the illusion of knocking off zeros to make it look like a new ruble -- which was something that was being discussed," says Alistair Breach, an economist at the Russian-European Center for Economic Policy, alluding to the practice of adjusting currencies to declining purchasing power by changing face values, such as reissuing a 1,000-ruble note as a 100-ruble note.

"The point of the issue is a new start, to show that inflation has stabilized and that this is good hard money and the zeros don't make a difference," he says, noting that inflation leveled off in 1996 at 22 percent for the year and is running at less than 1 percent a month so far this year.

"And with the ruble only declining 10 percent against the dollar so far this year, the Central Bank can fairly say the ruble is stable," says Breach.

Pub Date: 3/17/97

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