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Unit of Account

Eurasian Development Bank (EABR) comes up with a regional account instrument in EAEU similar to ECU which was used in Europe in 1979-1998 before Euro.  “Izvestia” have learned about this initiative from Eugeniy Vinokurov, Director of the Center of Integration Researches of EABR. So far the main proponent of the idea is Kazakhstan which encourages to go even further and use blockchain as the currency of account. Eurasian Economic Commission (EEC) said that the issue had not been discussed yet but pointed out that a single unit of account could lead to more effective currency risks management and reduce transaction costs in clearing.

The world has large experience of units of account in different regional integration associations as well as in more global scale. Best known are SDR (special drawing rights of IMF). European ECU and transferable ruble (unit of account in Council for Mutual Economic Aid, CMEA). It is important that the unit of account can’t be considered as full-fledged currency – it is used only for payments between countries. Today payments between EAEU countries and Russia are in Rubles. Unit of account could change it EABR hopes.

There are a number of instruments which we offer monetary regulator for discussion in the long-term period. For example regional unit of account – not a single currency but an instrument for easier payments – Eugeniy Vinokurov explained to “Izvestia”. According to him technically it looks like accounting of a unit of money in the regional currency basket with certain shares. The expert reminded that recently Kazakhstan had come up with a regional unit of account based on crypto currencies. However Eugeniy Vinokurov underlined that there are still too many questions about its functioning with regards to financial market: emission, funds turnover control etc.

- We start to think it over but there are too many diverge points – he added. This could be a “unit of account of the Silk Road” he suggested and stressed that the single unit aims only at trade flows maintenance.

According to Tigran Davtyan, Director of Financial Policy of EEC nobody is talking about coping of financial technologies from other countries.

-In perspective a Eurasian unit of account could raise the share of national currencies in mutual trade of state-members and lead to more effective management of currency risks and lower transaction costs in clearing, - he underlined positive effect of a single currency unit.

In general central banks of EAEU countries are ready to consider this initiative. However according to a source close to EEC the Central Bank of the Russian Federation believes that “Ruble should play the role of the single currency and no other is needed”. The regulator estimated the share of Ruble in international payments is 1%, while in payments within EAEU – 60-80%. Nevertheless the Central Bank confesses that national currency dominates only in bilateral deals with Russia. With other countries US dollar prevails which means that “Ruble as national currency  doesn’t function as universal unit of account and payment, and only partly as unit of account and circulation”

According to Nataliya Shilova, Deputy Director of Macroeconomic Prognoses in Binbank, there is no supposition for Rule to become a full-fledged regional currency.

-The role of the Russian currency on world market has weakened from 12th rating position (in 2013) to 17th (2016), the share of “Ruble market” has reduced from 1.6% to 1.1%. For comparison the share of RMB grew at the same period from 2.2 to 4%. RMN share raises, Ruble share decreases. We don’t expect any changes in the nearest future because sanctions and stronger tense in geopolitics do not contribute to Ruble’s role as a regional currency, - she explained.

In his turn Dmitry Kulikov, expert of AKRA research and prognoses group is sure that the development of regional single unit of currency is practical if it is followed by gradual steps towards a currency union. In his opinion a unit of currency can be used without risk is operations between central banks and governments, with regards to debt relations first of all. At the same time Russia and Kazakhstan with historically stable rate of national currencies have more reasons and opportunities for mutual currency integration than other EAEU countries.

The Central Bank of the Russian Federation participates in formation of a single financial market concept of EAEU, according to press service of the regulator. A representative of the Central Bank said this concept included equalization of legislation for stronger financial integration for the benefit of all parties.

This post is also available in Russian: Введение новой расчетной единицы