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.
Over the past year, military-political relations between Minsk and Kyiv have become complicated. Due to their high inertia and peculiarities, this downward trend would be extremely difficult to overcome.
The root cause of the crisis is the absence of a common political agenda in the Belarusian-Ukrainian relations. Minsk is looking for a market for Belarusian exports in Ukraine and offers its services as a negotiation platform for the settlement of the Russo-Ukrainian war, thereby hoping to avoid political issues in the dialogue with Kiev. Meanwhile, Ukraine is hoping for political support from Minsk in the confrontation with Moscow. In addition, Ukraine’s integration with NATO presupposes her common position with the Alliance in relation to Belarus. The NATO leadership regards the Belarusian Armed Forces as an integral part of the Russian military machine in the western strategic front (the Baltic states and Poland). In addition, the ongoing military reform in Ukraine envisages a reduction in the number of generals and the domestic political struggle makes some Ukrainian top military leaders targets in politically motivated attacks.
Hence, the criticism of Belarus coming from Ukrainian military leadership is dictated primarily by internal and external political considerations, as well as by the need to protect the interests of generals, and only then by facts.
For instance, initially, the Ukrainian military leadership made statements about 100,000 Russian servicemen allegedly taking part in the Russo-Belarusian military drill West-2017. Then the exercises were labelled quazi-open and military observers from Ukraine refused to provide their assessment, which caused a negative reaction in Minsk. Further, without citing specific facts, it was stated that Russia was building up its military presence in Belarus.
Apparently, the Belarusian and Ukrainian Defence Ministries have entangled in a confrontational spiral (on the level of rhetoric). Moreover, only a small part of the overly hidden process has been disclosed. That said, third states are very likely to take advantage of the situation (or have already done so). This is not only about Russia.
The Belarusian Defence Ministry officials are restrained in assessing their Ukrainian counterparts. However, such a restraint is not enough. Current military-political relations between Belarus and Ukraine are unlikely to stabilise without the intervention of both presidents.