CHERVONETZ, the new Russian monetary unit, instituted in 1922 as part of the New Economic Policy. The old pre-World War rouble had, owing to heavy war expenditure, the military Communist era of 1917-22 and to post-war heavy budget deficits (balanced deliberately by fresh note emissions), depreciated to vanishing point. When the Soviet Government realized the need of a stable currency they instituted the chervonetz.
The chervonetz equals I o pre-war roubles of 2S. 1d. Cher vonetz notes were issued by the new State bank, having a back ing of 25% in gold, platinum or stable foreign exchange, the re maining 75% cover to consist of marketable goods, short-term securities or approved bills of exchange. These notes were from their inception restricted in their issue, so as to maintain the above provisions, and in particular steps were taken to discourage them from entering into internal circulation. They were used as the basis of the nation's currency system and foreign exchange rates were quoted in chervontsi.
Side by side with the chervonetz a new series of rouble notes was issued intended for internal use. These had no fixed conver sion ratio against the chervonetz, and for the two years imme diately succeeding their first appearance they were issued freely to balance successive budget deficits. Hence they in turn rapidly depreciated until the conversion ratio reached the astronomical figure of 200,000,000,000 roubles to one chervonetz.
In 1924 it proved possible to balance the budget and so to reorganize the internal currency. New currency rouble notes were issued, their volume being limited to half that of the chervontsi in circulation. Simultaneously the old Soviet or 1923 roubles were gradually withdrawn. Since 1924 the internal currency has consisted of stable rouble, currency notes and subsidiary coins. (See also CURRENCY, ROUBLE.)