Belarusian ruble devalues by 18% in two weeks
Last week the Belarusian currency continued depreciating and in the past two weeks it had devalued by 18%. The only way to stabilize the foreign exchange market in Belarus is to receive a large loan or to hold a mass-scale privatization of the state property.
Last week the depreciation of the national currency resumed. Two weeks following the introduction of the supplementary trading session the Br exchange rate had been increasing, however during the last two weeks the Belarusian ruble devalued again, breaking the records of the September black market exchange rate, before the introduction of the supplementary session. On 5 October the market exchange rate was Br 7610 per USD, while the official exchange rate was Br 5748. The gap between the rates was less than Br 2000. Many experts expected the rates to converge. However as soon as 13 October the market exchange rate reached Br 9010 per USD (Br devalued by 18%). As a result, the margin between the two exchange rates increased significantly again.
The volume of money in Belarus on 1 October 2011 amounted to Br 78,920 trillion, it increased in January-September by 57.02%. In September the money volume increased by 10.4%. Cash in circulation (monetary aggregate M0) amounted to Br 7.727 trillion on 1 October 2011 and increased by 15.2% in September (by Br 1.17 trillion) following August decrease by 5%. In the course of the past 9 months the aggregate has increased by 71.95%.
The gold reserves of the National Bank of Belarus (NBB) on 1 October 2011 amounted to 31 tons. On 1 July the gold reserves amounted to 31.5 tons. Therefore in the third quarter the gold reserves declined by 0.5 tons, or by 1.6%.
“This decision is another step in the consistent implementation of the macroeconomic policy of the National Bank and the government, which is aimed at alleviating pressure on the exchange rate of the Belarusian ruble and decreasing the inflation rate,” said the NBB press office.
On 14 October the refinance rate was increased to 35% per annum. “This decision is another step in the consistent implementation of the macroeconomic policy of the National Bank and the government, which is aimed at alleviating pressure on the exchange rate of the Belarusian ruble and decreasing the inflation rate,” said the NBB press office.
On 14 September the refinance rate has been increased by 3% to 30% per annum.
The depreciation of the Belarusian ruble was due to a number of reasons. Firstly, the importers waited to the last moment to purchase the foreign currency, hoping for better exchange rates. Now all the pent-up demand has been put up on the market. Secondly, exporters, due to “inadequate” growth of the Br, as well as due to taxation of exchange rate margins, were delaying the sale of the foreign currency, which resulted in an excess of the demand over the supply. Thirdly, the National Bank almost did not interfere in the trading sessions therefore the rate might continue fluctuating up and down. Fourthly, the IMF mission is working in Minsk at the moment therefore the National Bank tries to show them the real market. Finally, regardless of all the assurances, the authorities continue using the printing press, therefore Belarusian rubles return to commercial banks as increased demand for foreign currency from the population and businesses.
Depreciation of the Belarusian ruble will again spur the inflation and devaluation expectations of importers and exporters.
Depreciation of the Belarusian ruble will again spur the inflation and devaluation expectations of importers and exporters. However, most likely, next week the Br exchange rate will stop falling due to taxation week (tax-payers will need Br to pay taxes due on 20 October). However in the long term, the only way to stabilize the foreign exchange market in Belarus is to receive a large loan or to hold a mass-scale privatization of the state property.
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.