Negotiations on the use of the Russian ruble in Belarus are currently underway. According to the National Bank of Belarus, the issuance of foreign currency (Russian ruble, dollar and euro) will not solve the problem of strengthening macroeconomic stability and ensuring the external balance.
The National Bank stresses the need to implement economic policy measures aimed at reducing the imbalances and distortions in the economy in order to meet the challenges.
However, the National Bank notes that Belarus and Russia are constantly working on "the possibility of expanding the use of both the Russian and the Belarusian ruble in mutual payments between economic entities of both countries," creating the necessary prerequisites, BelTA informs.
"However, the feasibility of establishing a currency union of Belarus is highly dependent on the specific arrangements and the implementation of general economic conditions and monetary policy," said the National Bank.
The National Bank notes that the introduction of the new single currency and monetary union could become the final integration of Belarus and Russia after the full formation of a free trade area, Customs Union and Common Economic Space.
National Bank: Introduction of foreign currency will slow economic growth
However, as the central bank of the country informs, the use of foreign currency, which means the actual rejection of an independent monetary policy, will reduce the country's ability to respond to economic shocks by monetary instruments, as fiscal policy may be insufficient for complete neutralization. This, in turn, will lead to a slowdown in economic growth or recession and rising unemployment. Also, the National Bank will be forced to abandon the function of lender of last resort and to use other mechanisms to ensure the stability of the banking sector.
Former Deputy Prime Minister and Finance Minister of Russia Alexei Kudrin believes that it’s not profitable for Russia to move to a single currency with Belarus in the coming years. According to the expert, this will increase the risks of the Russian ruble and seriously weaken it. At the same time, according to Alexei Kudrin, devaluation does not threaten the Russian ruble.