Belarus officially acknowledges devaluation of its currency
The devaluation of the Russian ruble and some statements made by the Belarusian authorities have led to panic on Belarus’ foreign currency market. In order to mask devaluation, a 30% tax on buying the foreign currency has been introduced until February 1st. However, the National Bank has not waited until February, and instead introduced a unified buying rate for foreign currency. With the help of this new method of price assessment, the National Bank is trying to minimize the losses of gold and forex reserves. This might lead to the Belarusian ruble further devaluing.
December is the month when expectations of devaluation are higher among Belarusians. This year, concerns were boosted by the situation with the Russian ruble. Statements made by the Belarusian authorities on the stability of the Belarusian ruble’s exchange rate had the opposite to intended effect. Due to the steep upsurge in demand for the foreign currency, the general public has purchased more than $180 million on net basis. Another impact factor which influenced the fall in gold and forex reserves was a significant amount of foreign debt repayments in December. The total amount of gold and forex reserves has fallen to the critical point of $5 billion.
In order to mask the devaluation of currency starting from December 19th the Belarusian authorities have introduced a 30% tax on the purchase of foreign currency on the exchange market. This measure has allowed the government to reach the end of 2014 without significantly adjusting the budget. By gradually lowering the tax to 20% by December 30th, to 10% by January 5th, and cancelling the tax on January 8th, and with the official exchange rate of the Belarusian ruble growing, the Belarusian authorities have carried out the devaluation of the national currency. The Belarusian ruble has fallen by 26.4% in respect to the US dollar by January 8th, 2015 in comparison to December 19th, 2014.
Because of the more significant fall of the exchange rate of the Russian ruble to the US dollar, this devaluation is not sufficient. After the change of the rate, trading on the exchange market continues with the many-fold excess of demand for foreign currency over the current supply. At a time when there is a lack of secure income of lending resources, the National Bank has changed its methods for assessing the currency exchange rate. The ratio of foreign currency in the reserves was changed with the share of the Russian ruble growing which might lead to the Belarusian ruble being further anchored to the currency of Belarus’ main export partner. The nonsterilized interventions will be carried out to some extent, without the use of gold and forex reserves. Such an approach allows for larger flexibility of the Belarusian ruble’s exchange rate. However, it also increases the risks of a repeated increase in the national currency’s exchange rate.
In such a manner, Belarus has failed to avoid devaluation because of its dependence on its main trade partners’ currencies. The devaluation which was carried out by the Belarusian authorities is insufficient, and the 2011 scenario of a gradual devaluation could repeat.
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.