Affordable corporate loans may put pressure on financial market
The National Bank led other banks to an agreement about a single level of interest rates on corporate deposits. The ultimate goal of this agreement is to ensure affordable loans in the economy. However, such drastic measures may have an unpredictable impact on the currency market.
Belarusian banks signed a memorandum envisaging reduction of corporate interest rates on rouble deposits to 35% per annum. The National Bank denied its influence on this agreement.
Deposit interest rates for individuals are higher than corporate ones due to greater flexibility of individuals’ investment assets.
With interest rates reduced, companies have several options. Firstly, to accept the reduced interest rate on deposits due to overall economic slowdown. Secondly, to hedge devaluation risks by purchasing foreign currency in order to buy raw materials abroad or inside Belarus.
If companies agree with lower interest rates, money will remain in the banking system and may be used to issue loans at lower interest rates to companies, which experience an acute shortage of working capital. In other cases, in order to replenish the banking system liquidity, the National Bank will have to switch on money print to issue loans.
If commercial banks gain constant access to the National Banks’ liquidity, they will no longer need to use high interest rates on rouble deposits to attract money from the population and will start lowering them. In response, the population’s demand for foreign currency will increase sharply. In addition, the situation may be exacerbated by a possible increase in demand for currency by legal entities.
In addition to devaluation expectations, the main suppliers of raw materials from Russia will resume operations only by mid-January 2014, which means that Belarusian producers will have to stock up with raw materials and products to ensure uninterrupted operations in early January. This also means producers will have greater demand for foreign currency. It is worth mentioning that substantial external debt repayments are also due in December 2013 and January 2014.
Belarus, however, has not announced that additional foreign exchange resources will become available in the immediate future. Its international reserves have fallen below $6.5bln. As a result, Belarusians should anticipate various restrictions on purchase of foreign currency and depreciation of Belarusian rouble.
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.