EAST GERMANY REVISES EXCHANGE RATE FOR THE VALUTA MARK

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T01003A000900160001-4
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 7
• Document Creation Date: November 16, 2016
• Document Release Date: April 27, 2000
• Sequence Number: 1
• Publication Date: March 14, 1960
• Content Type: BRIEF

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CONFIDENTIA L
CIA/RR CB 60-16
CURRENT SUPPORT BRIEF
Copy No.
14 March 1966
EAST GERMANY REVISES EXCHANGE RATE FOR THE VALUTA MARK
OFFICE OF RESEARCH AND REPORTS
CENTRAL INTELLIGENCE AGENCY
This report represents the immediate views of the
originating intelligence components of the Office
of Research and Reports. Comments are solicited.
This document contains information affecting the national defense of
the United States, within the meaning of the espionage laws, Title 18
USC, Sections 793 and 794, the transmission or revelation of which
in any manner to an unauthorized person is prohibited by law.
CONFIDENTIAL
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CONFIDENTIAL
EAST GERMANY REVISES EXCHANGE RATE FOR THE VALUTA MARK
The East German government in recent months has begun to re-
port its commodity trade statistics in a valuta (foreign exchange)
mark valued at one eastmark to .95 rubles, in effect establishing
an exchange ratio of 4.2 eastmarks to the dollar. The new rate,
which is the equivalent of both the East German non-commerical rate
for the dollar and the West German official rate of exchange, is a
far better reflection of the relative purchasing power of the east-
mark than is the current official commerical rate of exchange of 2.2
eastmarks to the dollar,*
In a lead article appearing in the official newspaper Neues
Deutschland (6 December 1959), Heinrich Rau, East German Minister
for Foreign and Interzonal Trade, stated that commodity trade between
East Germany and the USSR during 1960-65 will be "over 50 billion
valuta-rubles, which corresponds to a sum of 52-1 billion marks," At
the current official commercial rate of exchange, the corresponding
sum would be only 27.8 billion marks. A subsequent article appearing
in the same newspaper (8 January 1960), though containing only a con-
fused and inadequate explanation of the rationale behind the adoption
of this new valuation of the eastmark, indicates that it now will
be the policy of the Ministry to apply this rate when dealing with
foreign trade matters. Thus far, however, the East German government
has not issued a decree officially announcing the new exchange rate.
It should be pointed out that, inasmuch as Satellite currencies
are not utilized in international settlements,** the principal effect
.of such a revision in East Germany will be felt in its system of
domestic accounting for foreign trade transactions. A revision of the
foreign exchange rate alone, unaccompaned by revisions in the domestic
price structure, will have no effect on the net amount of price equali-
zation funds which must be covered. in the national budgets Neverthe-
less, this de facto "devaluation" of the eastmark automatically reduces
the "profits" on individual import transactions as well as the "losses"
on individual exports. The "devaluation" also should lessen somewhat
the tendency of East German exporters and importers, so prevalent in
the past, to claim no responsibility in any given transaction for the
wide difference between the eastmark equivalent of the foreign exchange
received or paid out and the value of the product at domestic prices,
the total amount of which had to be equalized through the domestic
accounting system, With the elimination to a large extent of the dis-
tortions created by an artificial exchange rate, the remaining differ-
ences should now be more representative of variations in the East Ger-
man domestic price structure. The values of exports and imports in
terms of the new foreign trade mark will more closely approximate
average hark-dollar ratios, thus making it more feasible for East
German planners to determine to what extent domestic costs are incon-
sistent with average industrial costs in other countries,
* This is not to say that the real values of the east and westmark
.are equal inasmuch as the official rate for the westmark considerably
undervalues it.
** In intra-Bloc trade the ruble represents the clearing unit of
account whereas in Bloc trade with the Free World clearing accounts
are based on the currency of the Western partner involved or on the
"hard" currency of some third country, e.g., British pounds or U.S.
dollars.
:L4 March 1960 CIA/RR CB 60-16
Page 2
CONFIDENTIAL
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CONFIDENTIAL
There are at present no indications that the other European
Satellites are planning similar moves to adopt for commericial pur-
poses the non-commercial rates established during 1957-58 or any
other more realistic valuation of their currencies. It is, never-
theless, possible that these steps will be taken eventually. In
view of current attempts throughout the Communist Bloc to measure
the profitability and efficiency of foreign trade activities,:.it
would appear that simplification of their domestic accounting
practices alone would be sufficient justification for similar
changes in their exchange rates.
Tabulation of Official Rates of Exchange
of the East German Mark
Commercial Transactions
1 DME = $,45 US
1 DME = 1.8 Rubles
1 DME = $.25 US
1 DME = 2.6 Rubles
25X1A
`--Analyst:
14 March 1960 CIA/RR CB 60-16 Page 3
CONFIDENTIAL
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 TO: Chief Dissemination Branch, Support Staf-! "'T
25X1A
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FrrM: , Chief, Current Support St i ORR
Brief
SUBJECT., Distribution of Current Support $ No. SO-16,
MARK cL 196.4
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Brief
Please distribute the attached Current Support 1jWMyjfijyMNo. 641-1.1_
as follows:
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 14 Aftirch 1960
Approved For Release 2000/06/(J7;, DP79T01003A - ate
TO: Chief, Dissemination Branch, Support Staff, OCI ~77c J~
FROM: Chief, Current Support Staff, ORR /
Brief
SUBJECT: Distribution of Current Support No. 80-16
W T M A NY 8 8ES EXCHAN RATE FOR VALUTh MARK 14 gbh 1960
(Date)
(Title) Brief
Please distribute the attached Current Support er M-MMINo. 6O- 6
as follows:
Copy No. Recipient
1 DD/I
2- 3 NIC
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CA/SSB/OCI
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INDICO/OCI
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Director NSA
Washington 25 D. C
Attention: 25X1A
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Chiefs, St/I/D/ORR
1338 M Building
25X1A
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(Initia
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RR/St/CS: ji/4555(29 Jul 59 ~-~ CT
Appr a 2000/06/07 : Cl -RD1 #jffi~A?00900160001-4
 CSB DRAFT: Revision of rate of exchange of East German Valuta Mark
Ch/St/CS
TO: (Officer designation, room number, and
building)
25X1A
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Ch/ERA.
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9. OCI Printers-
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OFFICER'S
INITIALS
VAN
VP~
9 February 1960
COMMENTS (Number each comment to show from whom
to whom. Draw a line across column after each comrrient.)
rv~ ~r 2 a~ if !.L
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