Home » today » World » The Eurasian Economic Union: Towards a Single Monetary Policy – 2024-04-20 06:52:08

The Eurasian Economic Union: Towards a Single Monetary Policy – 2024-04-20 06:52:08

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Russia and Kazakhstan are increasing trade settlements in national currencies, Russian President Vladimir Putin noted during the 19th Forum for Interregional Bilateral Cooperation held on November 9. In 2022, mutual trade increased by over 10%. The EAEU and the CIS have become the locomotive of the de-dollarization processes of the world economy: in these structures, the share of national currencies has reached 85-90%, Russian Foreign Minister Sergey Lavrov said on November 8.

And although quantitative indicators (and not only in the case of Russia and Kazakhstan) are sometimes still expressed in dollars, the idea of ​​a single currency for the Eurasian space, proposed back in 2021 by Nursultan Nazarbayev, is still being discussed in the expert community.

The founding documents of the EAEU, signed in 2014 by Russia, Belarus and Kazakhstan, provided for a single currency and a Central Bank in Almaty, recalls economist and financial analyst Alexander Razuvaev, who “…strong economies should be included in the monetary union. And that automatically includes Russia, Belarus and Kazakhstan, as well as possibly Azerbaijan and Uzbekistan. You can also invite Turkey, for whom this will be the end of the lira inflation saga.

The existence of the sovereign economy requires 300 million people, which, however, do not yet exist. A common market must be created with someone, but no one but the Turkic countries. A single market and a single economy will not work without a common currency.

Representatives of the Eurasian integration structures and national officials have not yet gone that far. Thus, the head of the Agency of the Republic of Kazakhstan for regulation and development of the financial market of Kazakhstan, Madina Abilkasimova, spoke negatively about the prospect of introducing a single currency on the territory of the EAEU:

Such a question within the framework of our integration cooperation has never been put up for discussion and has never been considered,” and “even proposals to introduce a single EAEU currency” have not been reported. “We support the expansion of payments in national currencies between our countries’ Abilkasimova added.

The official representative and assistant to the head of the Eurasian Economic Commission I. Malkin spoke in the same spirit at the beginning of the year: the issue of a single Eurasian currency “is not currently on the active agenda of the EAEU”.

At the same time, the use of new approaches to making payments in the Union is “overdue” and in this area there may be “totally different solutions, not necessarily a transition to a single currency”. The list of possible solutions includes “the introduction of a single unit of account, the introduction of a common crypto- or digital currency. EAIS experts study these questions. Based on 2023 results. “perhaps we will be ready to formulate some concrete proposals. But the consent of all member countries of the union will be mandatory.

Meanwhile, the share of national currencies in mutual payments in the EAEU in 2022 amounted to 74%, of which 71.5% fell to the Russian ruble, 1.4% to the tenge, 0.2% to the Belarusian ruble. Thus, more than a quarter of these settlements in 2022 were made in US dollars and euros.

At the same time, mutual trade represents only 8.6% of the total trade of the member states of the union with third countries. In trade with other countries, the EAEU countries use “enemy” currencies because, according to the expert from the Russian University of Economics, they. Plekhanov Elena Voronkova, “the national currencies of the countries that are members of the Union are not sought after in world trade simply because the share of these countries in world trade is too small.”

If we imagine that one day Russia will completely switch to national currencies in payments with EAIS countries, then, according to the expert, the use of revenues received in these currencies will be “practically impossible: the reverse trade flow from EAIS partner countries can to be several times smaller, and the national currencies of the EAEU countries are practically not sought after on the world market due to their weak participation in world trade.

It is quite possible to agree with such assessments because the exchange rates of all EAEU countries are linked to the exchange rate of the Russian ruble. In other words, even the smallest fluctuations in the exchange rate of the ruble are immediately reflected in the exchange rates in other EAEU countries. This, of course, imbalances the prices for mutual supplies of goods, which leads to their revision during trade operations.

According to available information, the very sharp decline in the payment and purchasing power of the Russian ruble against the US dollar and the euro (as well as other foreign currencies) in the summer and autumn of this year led to a price revision of at least a third of the total volume of goods delivered between the Russian federation and other EAIS countries. Unfortunately, in this case we are talking about revisions mainly in the direction of increasing the prices of goods for the Russian side.

As a result, distortions of the real situation in trade relations occur. Based on the value ie. price, and the dynamics of trade, conclusions are made about the stable growth of interstate trade in the conditions of growth of its value, and not in volume (commodity) indicators.

Meanwhile, the mentioned trend of the exchange rate with the Russian currency forces us to review the previously planned volumes of capital investments in joint projects and programs with other EAIS countries. In turn, this circumstance makes it even more difficult to reliably determine (at least in the medium term) the real volumes of prices for mutual supplies, as well as the volumes of real investments in joint projects/programs.

The latter is problematic because, given the serious devaluation of the ruble, in this case both the prices of raw materials and capital investments are automatically depreciated. Especially in programs and projects designed (including payback periods and other indicators) for more than one year. The payback period obviously depends on effective demand, which in turn depends on exchange rates that determine prices, tariffs, and therefore the level of effective demand for goods, services, and investment.

It is clear that the lack of exchange rate regulation contributes, as stated above, to the still low share of mutual trade of the EAEU countries in their total foreign trade turnover. In foreign trade, the emphasis remains primarily on world currencies, as the US dollar remains the leader in terms of share in international payments (at least 40%). The second position is still occupied by the euro (25-30%), the third by the pound sterling (6-8%), the fourth by the yen (3-5%) and only the fifth position by the yuan (2.5%). -3.5%). ).

In connection with these factors, national (in the Russian Federation) and interstate regulation of the exchange rate of the ruble and related “Eurasian” currencies is required, as practiced within ASEAN, MERCOSUR, the Economic Community of Eastern and Southern Africa, and the Council for cooperation for the Arab States of the Persian Gulf, the Caribbean Community, partly the areas of the West and Central African Franc.

As in some of the above associations, in the Caribbean Community (CC) the participating countries jointly regulate the exchange rate of the Caribbean dollar, the common currency of the 16 member countries of the CC. It is on this basis that viable supranational monetary mechanisms and, accordingly, currencies are formed.

In this regard, it is worth recalling that on the basis of the interstate regulation of national exchange rates within the framework of the SIV (1964-89), a successfully operating mechanism of a single transferable (non-current) ruble was created.

Therefore, it is this approach to the issues of single / interstate or supranational currency – monetary or non-monetary – that will maximize the feasibility of integration projects and programs. In addition, this will ensure high growth rates of mutual trade volumes and the greatest efficiency of mutual payments within the EAEU in non-Western currencies.

Translation: ES

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