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Future of Russia's 1-Kopek Coin in Question
 | By Richard Giedroyc, World Coin News
May 20, 2008 |
Russia's lowly 1-kopek coin may become a thing of the past if economists have their way, but the Bank of Russia (Russia's central bank) is still concerned the public could interpret removal of the coin the wrong way.
Russia is having the same problem as is the United States regarding production of its metal coins. Due to recent increases in the price of metals the 1-kopek coin now costs more to produce than is its face value.
Goznak is the government agency that issues coins and bank notes. Goznak head Arkady Trachuck recently told the Russian news reporting agency Izvestia, "We could make the decision to round up prices to 10 kopeks. Where are kopeks [still] required here?" Trachuck pointed out there are alternate proposals, and he is not ready to act on any of them at this time.
Public perception is the biggest problem. The public still remembers the inflationary period of the 1990s during the rule of former President Boris Yeltsin, a period in which ever-increasing denominations of bank notes appeared and purchasing power quickly eroded. The government eventually reformed the currency by lobbing three zeroes off all denominations. The central bank recently introduced a 5,000-ruble bank note, while increasing the monetary supply by 48 percent, an action that has raised a lot of eyebrows.
Public confidence in the ruble was described in the March 24 issue of The Moscow Times newspaper as "fragile," adding, "Rumors of a potential redenomination of the ruble have been swirling in the last couple of months."
ING economist Tatyana Orlova was recently quoted by Izvestia as saying, "If I were a monetary authority I would not do anything that could be interpreted as a redenomination by the population."
She added that when the public perceives that coins and bank notes may be redenominated "people stop saving, and they try to spend, and the economy is already quite overheated and inflation is on the rise. The central bank [Bank of Russia] would probably want to wait for the time when inflation has gone down a bit."
Orlova is in favor of eliminating the 1-kopek coin. "If they get rid of just one kopek, it will not have a big impact. It has become so small, and inflation is on the rise," adding, "Many shops have [already] rounded up their prices. ... So if they take [the single] kopek out of circulation, it should not affect prices greatly."
Rumors of inflation? Trachuck calls such rumors "nonsense," toeing the official line expressed by Russian President Vladimir Putin during February that there will be no redenomination of the ruble currency. Trachuck did clarify that Goznak does intend to recall bank notes and re-issue them, thus following recommendations made by Interpol. Interpol, concerned that counterfeiters will gain the upper hand, recommends that bank notes be withdrawn and re-issued every seven years. Normally such re-issues do not include coins.
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