Accumulation of savings in foreign exchange is a devaluation expectations indicator
After a series of devaluations in the country, the Belarusian population, having the slightest fear of the Belarusian ruble devaluation, follows the traditional pattern and transfers savings into foreign exchange.
On October 12th, 2012 the National Bank published data on money supply. In September 2012, the outflow of ruble deposits from the Belarusian banking system has been recorded for the first time since the beginning of the year.
In September 2012, the population bought USD 365.6 million net, partly due to increased wages. In the first half of 2012, the population was selling currencies for daily needs, in the second half of the year wages rise has resulted in savings accumulation and the need to sell the currency disappeared.
However, the relatively high rates on ruble deposits amid relative stability in the foreign exchange market resulted in an increase in population’s ruble deposits. Since the beginning of the year to September the volume of short-term BYR deposits in Belarusian banks increased from BYR 9.4 trillion to BYR 13.6 trillion.
In September 2012 the situation has changed. Problems with foreign trade resulted in shrinking foreign currency proceeds. Reduced BYR deposits rates reduced the attractiveness of BYR deposits amid increasing devaluation expectations.
The BYR/USD/EUR exchange rate was BYR 8,500 per US Dollar and BYR 10,990 per Euro.
The population’s reaction to these developments was traditional: people started closing BYR deposits massively. BYR deposits in September 2012 shrank by BYR 738 billion. Businesses reacted in the same way. Short-term denominated corporate deposits decreased by BYR 823.2 billion.
Thus, the National Bank’s fears about the financial illiteracy of the population are somewhat exaggerated. Previous experiences have cemented in the people’s minds the effective scheme of preserving their savings. If people feel any uncertainty about the BYR exchange rate, they quickly exchange ruble savings into foreign currency and for safety reasons use foreign currency deposits even if their profitability is falling.
The Belarusian authorities regard the Catholic conference as yet another international event to promote Minsk as a global negotiating platform. Minsk’s proposal to organise a meeting between the Roman-Catholic Church and the Russian Orthodox Church is rather an image-making undertaking than a serious intention. However, the authorities could somewhat extend the opportunities for the Roman-Catholic Church in Belarus due to developing contacts with the Catholic world.
Minsk is attempting to lay out a mosaic from various international religious, political and sportive events to shape a positive image of Belarus for promoting the Helsinki 2.0 idea.
Belarus’ invitation to the head of the Holy See for a meeting with the Patriarch of the Russian Orthodox Church should be regarded as a continuation of her foreign policy efforts in shaping Minsk’s peacekeeping image and enhancing Belarus’ international weight. The Belarusian authorities are aware that their initiative is unlikely to find supporters among the leadership of the Russian Orthodox Church in Moscow. In Russia, isolationist sentiments prevail.
In addition, for domestic audiences, the authorities make up for the lack of tangible economic growth with demonstrations of growth in Minsk’s authority at international level through providing a platform for religious, sportive and other dialogues.