Belarusian banks to see a decrease in private deposits in all currencies
Private deposits in the Belarusian banking system have decreased. In 2016, Belarusians earned more than USD 600 million on interest from keeping funds in the Belarusian banks. Given the interest of the National Bank and enterprises in cheaper resource base, interest rates on the deposit market will continue to decrease, leading to the reduced interest of the population in deposits, hence, further decreasing deposits in all currencies in banks.
According to the National Bank, in March 2017, household deposits in national currency decreased BYN 8.3 million and deposits in foreign currency by USD 47.1 million. The decrease in deposits came amid a decrease in interest rates on deposits. In March, average interest rates on time deposits in foreign currency were 1.8% per annum and 10.0% per annum in BYN. Over the past three months, the yield on deposits in the national currency has decreased by 3.4 percentage points, and by 1.6 percentage points on currency deposits.
In previous years, household deposits constituted a significant source of income. In 2016, the population earned at least USD 600 million by placing deposits in the banking system. Taking into account private net currency sales in 2016, totalling USD 1.9 billion, savings outside the banking system have reduced less rapidly due to spending of interest on deposits for current consumption. Amid the absence of reliable borrowers and a lack of new projects from legal entities, banks invested currency funds of citizens in the National Bank bonds, which allowed refinancing external and internal government liabilities, albeit increased the debt burden on the budget due to interest payments on liabilities.
The National Bank carries out a consistent policy aimed at reducing interest rates on deposits. This made it possible to reduce the public debt servicing costs, the debt burden on enterprises, and people’s yield on interest, some of which then appeared on the foreign exchange market. Due to the underdeveloped stock market, Belarusians have a limited choice of investment instruments, while bonds of legal entities do not guarantee the return of funds, unlike deposits. The current yield on currency deposits is insufficient to retain people’s interest in deposits in the banking system, and the rates on rouble deposits are close to the projected annual inflation rate and do not ensure real protection for savings.
That said, household deposits in all currencies are likely to decrease. The National Bank is not concerned about rouble deposits outflow due to excess liquidity in the banking system. If currency deposits decrease significantly in the banking system, banks would increase interest rates on currency deposits. By allowing private persons to purchase government currency liabilities, the banking system would lose some revenue, while the National Bank would reduce public debt servicing costs.
Overall, the population responded to a decrease in yield on savings deposits, with decreased household deposits in banks. Amid the National Bank’s and enterprises’ interest in lowering the resource base costs, the population would use deposits as an alternative option for preserving funds, choosing short-term deposits; that said, overall deposits would decrease.
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.