Cheap loans only for select few businesses and industries
The high inflation rate projected for 2014 will prevent the National Bank from lowering the discount rate to 14-16% per annum. Unaffordable corporate loans imply that the enterprises will be unable to implement the 2014 production plans. The National Bank will provide cheap loans only to those enrolled in the state support programmes, others will have no access to cheap loans.
As of April 16th, the discount rate will be reduced to 22.5 % per annum.
In Q1 2014, consumer prices in Belarus rose by 4.9%, which means that the 2014 inflation forecast at 11 % is likely to be reviewed. The 2014 inflation forecast at 16-17% would be more realistic. In order to preserve positive interest rates in the economy, the discount rate should be higher than inflation. This implies that the discount rate in 2014 will not be reduced to 14-16 % on average.
The National Bank has reduced the discount rate by 1% as a matter of concession to the Government, which demands cheaper loans to the economy. Expensive corporate loans constrain production, which, in turn, results in falling imports and contained domestic demand. As a result, the international trade situation improves, while foreign currency net purchases on the domestic market reduce in all economic sectors.
Reduced production volumes will result in failed GDP forecasts, but, given the recession in Russia, this index is no longer a priority,. Maintaining the international reserves’ volume has moved to the top of the agenda (in Q1 2014 international reserves fell by more than USD 900 million, reaching a critical mark - 1 month worth of goods and services imports). If international reserves continue to fall, the currency market may start to panic.
A lower discount rate will have the outmost impact on the enterprises enrolled in the state programmes. In 2014, BYR 40 trillion was allocated for the state programmes, BYR 24 trillion of which will be spent on supporting agro-industrial complex. Loans issued within the state programmes are tied to the discount rate and bear benefits by partially reimbursing interest rates. For the remaining enterprises, loans will not become considerably cheaper, because the banks will preserve high deposit rates for the population to ensure cash inflow in the banking system. Therefore, throughout 2014, corporate loans will be largely unaffordable for most enterprises.
Thus, Belarusian economy is gradually creating different economic conditions for various enterprises. The state will provide assistance to state-owned enterprises by increasing the burden on the private sector.
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.