Foreign currency exchange: expansion of the currency corridor

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April 22, 2016 17:52

On 12 May the National Bank of Belarus expanded the corridor for the Belarusian ruble rate deviation against a basket of currencies (US Dollar, Euro, Russian ruble) from 8% to 12%.

Comment 

Expansion of the corridor was the right decision, it made the exchange rate policy more flexible, however, it was insufficient, given the balancing rate was far above the upper margin level set by the National Bank. 

Plurality of exchange rates distorts the economic picture and has negative impact on both, importers and exporters. Moreover, it affects insurance, leasing, construction and other companies, as their customer contracts are tied to the official exchange rate. Currency risks and uncertainty lead to higher prices and to degradation of variety of goods.

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Minsk strengthens ties with Russian regional elites
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President Lukashenka has met with the head of Chechnya Ramzan Kadyrov, who visited Minsk and the Minsk Automobile Plant. Minsk has always sought to have independent links with Russian regional elites, partially, to compensate for the Kremlin's diminishing interest in Belarus. In recent years, Belarus’ contacts with the Russian regions have been extremely intense. However, with some leaders of Russian regions, primarily heads of large republics, communication was more difficult to build. As many analysts in Minsk suggested, Minsk could regard contacts between President Lukashenka and the head of Chechnya as an additional communication channel for relieving tension in relations with the Kremlin. However, most likely, a trusting relationship with Kadyrov is a value for Minsk as such, provided Kadyrov’s broad business and political interests, and a high degree of autonomy for the Chechen leader from the Kremlin.

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