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.
Yet Minsk has not decided on the "patriots' case" and is attempting to break new grounds in relations with the West. Meanwhile, Brussels is ready to lower cooperation levels with the Belarusian authorities in anticipation of new political prisoners to appear after the trial against former White Legion activists, irrelevant of the charges, either preparation for riots, or creation of illegal armed groups, or any other. Minsk is unlikely to cross the red line in bilateral relations with the West and new political prisoners are unlikely to appear in Belarus.
The harsh clampdown on protests and arrests this spring in Belarus are unlikely to lead to new moves by the European Union, however, the EU would closely monitor ‘some investigations’, including the ‘patriot’s case’ aka the ‘White Legion’ case.
According to human rights defenders, 17 people remain in custody, of which 16 are former members of the White Legion and one supporter of Statkevich-led the Belarusian National Committee, Sergei Kuntsevich. The law enforcement has been releasing former activists of the White Legion and members of the Patriot Club, most likely in order to mitigate criticism from Western capitals. Amid Minsk Dialogue expert conference with the participation of Belarusian and EU officials, the authorities released from custody head of the Bobruisk "Patriot" Club Nikolai Mikhalkov. In addition, the Belarusian leadership expects to ease some tension by demonstrating greater openness to a dialogue with civil society on human rights issues. For instance, for the first time the Belarusian authorities and human rights defenders held consultations on Belarus’ fifth periodic report to the UN Human Rights Committee.
The Belarusian leadership has attempted to mitigate the West’s attitude towards the criminal prosecution against former activists of the "White Legion" by adding charges of creating an ‘illegal armed formation’ to ‘preparing for mass riots’ charges.
Apparently, Minsk also gains from speculations about possible disagreements among the executives - supporters of stronger ties with Russia, and "pro-Western" reformists lead by Foreign Minister Makei. That said, the Presidential Administration and President Lukashenka have full control over the foreign policy agenda and the law enforcement.
Overall, Minsk is determined to develop relations with Western capitals. The Belarusian authorities are likely to take controversial actions, i.e. to demonstrate the desire for liberalization in some areas and occasionally tighten repressions against the opponents, however without creating new political prisoners.