Belarusian ruble single exchange rate introduced

April 22, 2016 18:00

Belarus has fulfilled the basic condition set by its current and potential creditors. The lack of foreign currency reserves prevents the authorities from significant interferences at the foreign exchange.

On 20 October both sessions of the BCSE were merged to one resulting in a single exchange rate of the Belarusian ruble. The official exchange rate of USD increased by 52% (from Br 5712 to Br 8680), of the Russian ruble by 50.5% (from Br 188.70 to Br 277), of the Euro by 50.8% (from Br 7892.84 to Br 11 900). Head of the National Bank Nadezhda Ermakova said at a press conference on 20 October that new “official” exchange rate will be floating and will be determined by interaction between demand and supply. That is, the exchange rate will be determined by the supply and demand with minimal interventions by the National Bank aimed to eliminate drastic fluctuations of the exchange rate. According to Ms. Yermakova, the NBB plans to conduct currency interventions during trading only to prevent exchange rate fluctuations of more than 10 percent.

Comment

According to Ms. Yermakova, the NBB plans to conduct currency interventions during trading only to prevent exchange rate fluctuations of more than 10 percent.

Belarusian authorities have fulfilled the basic condition set by their current and potential creditors. The lack of foreign currency reserves prevents the authorities from significant interferences at the foreign exchange. The current strategy of the authorities is to reduce the foreign currency demand artificially (see comment regarding “Beltransgaz”) and try to implement a tight monetary policy with high interest rates and switched off printing press. In case of success, in the short term, the exchange rate will stabilize and even decrease slightly.

In order to control the Belarusian market, the monetary authorities requested their SES partners to allow to keep the mandatory sale of 30% of the foreign currency earnings rule until 2017 (the mandatory sale of foreign currency earnings rule is a relic of the command economy. Russia (in 2006) and Kazakhstan (in 1999) abolished it).