Four zeroes will be slashed from the ROL's tail next spring. Consequently, the current 10,000 ROL bill will metamorphose into a 1 ROL coin, which can only be found in the safes of commercial banks and of the National Bank of Romania at the time being. The move was decided yesterday, in a meeting between Finance minister Mihai Tanasescu and National Bank Governor Mugur Isarescu.
"The law draft on cutting zeroes will be ready in two weeks, will be submitted to the Government for endorsement and then sent to Parliament for debates," minister Mihai Tanasescu said. According to the Finance minister, the operation will need twelve months to be properly implemented.
The central bank would not comment on the announcement.
The hard ROL, resulted from the denomination, will probably "weigh" five euros, close to the value of Poland's domestic currency, for instance.
The ROL's tail expanded to six zeroes last year, as the National Bank of Romania issued the one million ROL bill. In fact, the million appeared because of the deferred denomination, which led to the ROL's continued erosion, because of depreciation and inflation. The most valuable monetary division is now worth 24.5 euros or 31 US dollars.
The political decision to slash zeroes from the ROL's tail was only made official late last year, but it was not immediately clear whether denomination would trigger the cut of three or four zeroes. In 2002, the Government had nixed the National Bank's proposal to cut three or four zeroes off the ROL's tail, leaving this step to its successors.
Slashing off four zeroes will not be taken lightly by the public, but people will have one year to get used to the idea and then, for another year, the new bills will be used together with the old ones.
Romanians will practically have to learn to use a new system of monetary divisions, as they will shift from hundreds of thousands and millions of ROL to tens, hundreds and thousands of ROL. In fact, the future calculations seem more complicated, as the monetary divisions will also be fragmented into "bani" (officially, the domestic currency's subdivision is called "ban", although it has not been used since 1990). The hard ROL will re-launch into circulation the 50 bani coins, the 1 ROL coin and, also, the 20, 50 and 100 ROL bills, which, at some point, will manage to eliminate the inflated prices triggered by the numerous zeroes.
Moreover, the hard ROL will demote many of Romania's billionaires to the status of simple millionaires.
The costs triggered by the replacement of all the existing bills and coins are significant, especially since metal subdivisions will also be needed, but the upsides of this operation are predominant.
The experience of countries such as Poland and the Ukraine, which performed the denomination almost ten years ago, points to a connection between cutting zeroes and reducing inflation. In Romania's case, the hard ROL is scheduled to appear as soon as inflation goes below 10 percent.
razvan.voican@zf.ro
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