Belarusian banks to see a decrease in private deposits in all currencies

April 17, 2017 12:47

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.

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The Belarusian authorities have launched a discussion on the moratorium or abolition of the death penalty under the pressure of Belarusian human rights activists and international community. Apparently, the authorities are interested in monitoring public sentiments and response to the possible abolition of the capital punishment. The introduction of a moratorium on the death penalty would depend on the dynamics in Belarusian-European relations, efforts of the civil society organisations and Western capitals.

In Grodno last week, the possibility of abolishing the death penalty in Belarus or introducing a moratorium was discussed.

The Belarusian authorities are likely to continue to support the death penalty in Belarus. During his rule, President Lukashenka pardoned only one person, and courts sentenced to death more than 400 people since the early 1990s. Over the past year, Belarusian courts sentenced to death several persons and one person was executed.

There are no recent independent polls about people’s attitude about the death penalty in Belarus. Apparently, this issue is not a priority for the population. In many ways, public opinion about the abolition of the death penalty would depend on the tone of the state-owned media reports.

That said, the Belarusian Orthodox Church and the Roman-Catholic Church stand for the abolition of the capital punishment, however their efforts in this regard only limit to public statements about their stance. Simultaneously, the authorities could have influenced public opinion about the death penalty through a focused media campaign in the state media. As they did, for example, with the nuclear power plant construction in Astravets. Initially unpopular project of the NPP construction was broadly promoted in the state media, and eventually, according to independent pollsters, was accepted by most population.