Economic lending frozen pending further reduction of loan interest rates
In May and June, the National Bank continued easing the monetary policy. Its sustained actions to reduce corporate loans rates have led to lending being suspended in anticipation of even lower rates. Currently, the rates remain high, but when they drop to 25% per annum, a rapid growth in rouble loans might occur, leading to liquidity shortages.
According to the National Bank, May 2014 saw the increase in lending to the economy at its lowest in the past year and a half.
In June, the National Bank continued to gradually reduce corporate loan interest rates. The rate for permanently available liquidity support operations was reduced to 26% per annum. As of June 14th, the size limit for interest rates on loans was set to 37.3% per annum. Auctions for placing banks’ available funds have been successful and the excess liquidity is more than BYR 1.5 billion. State enterprises are constantly provided with preferential loans under governmental programmes or receive partial rate-compensations on previous loans.
In these conditions, urgent situations apart, enterprises prefer not to raise any loans. They repay previously taken short-term expensive loans in anticipation of new, lower interest rates.
Not considering the preferential lending for housing construction, in May, corporate debt increased by less than BYR 500 billion or 0.3% of the total ruble debt in the economy, perhaps implying that enterprises have partially repaid their debt.
For most businesses, taking the economic situation into account, rates above 30% per annum are almost prohibitive. However, if rates drop to the level of 25-27% per annum, enterprises may resume lending, and the pent-up demand for loans may lead to a rapid increase in lending to the economy.
The excess liquidity in the banking system is insignificant and may be absorbed by the economy’s real sector in less than a month. During the summer, the state banks may use up some funds in order to finance a substantial amount of public investment programmes. With the current rates (35% per annum) rouble deposits are shrinking, and if the rates continue declining to the level of 25% per annum, the outflow of roubles from the banks might rise to BYR 1-1.5 trillion per month. All these factors create favourable conditions for the new liquidity crisis.
Belarus’ economy is anticipating further reduction in loan interest rates, meanwhile resorting to loans only when necessary. Belarus has received a USD 2 billion loan from Russia. This means that she can increase economic lending, including partially through money printing.
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.