Revaluation is a process in which there is an increase in the exchange rate of the national currency against the gold reserve, foreign currencies and international monetary units. This phenomenon is the opposite of devaluation. As a rule, resort to revaluation to reduce inflation. It is also an opportunity to acquire foreign capital at a lower cost. In most cases, revaluation is carried out by state financial management bodies.
General concept of revaluation
At a time when the gold security of the national currency was in effect, the gold content of banknotes increased as a result of revaluation.
Revaluation is an inevitable phenomenon that is necessary to regulate export-import operations. When a significant outflow of capital occurs in the country and at the same time the import of goods increases sharply, revaluation is almost the only method of regulating the economic situation. As a result, the value of imported goods decreases, while the value of exports increases sharply. This method is resorted to in extreme cases, since the revaluation of the national currency makes the country's economy uncompetitive.
On a smaller scale, revaluation can be any revaluation of cash or financial reserves. For example, revaluation of fixed capital and other assets on the balance sheet of a company or revaluation of cash at the cash desk. Revaluation is a generalized concept.
The reasons
Currency revaluation is a necessary measure, the use of which has a number of reasons. The main one can be called the fact that the balance of payments of the state for a long time had a surplus, conducting a foreign exchange operation in which there was an exchange of foreign currency in an amount significantly exceeding the exchange capacity of the central bank. Also, a capital infusion of foreign currency can cause a revaluation, which leads to a violation of the proportion of international capital and national currency. Revaluation may also be caused by inflation. Given the impossibility of exporting national goods due to their low competitiveness and high prices, there is an urgent need to import goods from abroad and export domestic capital. This, in turn, is also the cause of revaluation.
Effects
Devaluation and revaluation are opposing concepts. The latter is of benefit to importers and lenders. As a result of it, there is a rise in the cost of exports, as foreign importers have to pay more. But this significantly affects the competitiveness of exporters.
The following factors can be attributed to positive revaluation results:
- The inflation rate is falling.
- The growth of the surplus is suspended.
- Prices in the domestic market are declining.
- National goods are in high demand in the domestic market.
Risks of revaluation
- Prices for exported goods rise sharply, resulting in reduced competitiveness of national enterprises in the international market.
- The volume of investments poured into the national economy is sharply declining due to the disadvantage of the exchange rate.
- The domestic market is oversaturated with imported products.
- The pace of domestic production is reduced or completely halted.
- Reducing the flow of tourists.
Revaluation is an event of international importance, even if it is carried out in one of the countries.
Revaluation Examples
After the Civil War in the USA in 1861-1865.had to revalue to strengthen the national currency. It took a long 14 years. In 1973, revaluation also affected the German brand. In March, the official rate increased by 3%, then in June by another 6%. But at the same time, the brand was not exchanged for gold. The same fate befell the Swiss franc and the Japanese yen.
In 1971, the need arose to restore the balance in trade between Japan and the United States. For this, a revaluation was carried out. At the same time, Austria, the Netherlands and Switzerland also held it.
In 2005, the renminbi appreciated by 2%. At the end of 2007, the value of the national currency grew by another 20%. Today there is a slight decrease.
Revaluation in Russia
Currency devaluation and revaluation are unpleasant phenomena. Unfortunately, they did not pass over the Russian economy either. In 2015, a forced revaluation of the Russian ruble was carried out. And oil prices have absolutely nothing to do with it. December 2014 was marked by a sharp drop in the national currency, which was beneficial to the opponents of Russia. As a result of numerous sanctions by the United States and the EU, the Russian economy has been greatly shaken, and ordinary people have fully felt the approach of a social catastrophe. This was discussed in all forums discussing international relationships, as well as issues of politics and economics. At that time, information about the further revaluation of the Russian ruble was for some reason kept silent. And only in some financial reports was the appreciation of the national currency appreciable.
The reason for silence is the disadvantage of stabilizing the Russian economy. Some experts attribute the increase in the ruble exchange rate to the fall in the euro and oil prices by 40%. Russia is one of the main suppliers of oil. The proceeds are used to import goods. Oil is sold for dollars, and goods are imported mostly from Europe. Therefore, despite the economic crisis, the volume of imported goods practically did not decrease. Currency revaluation is a forced method, but it happened in Russia in a natural way.
