Foreign exchange market situation is unstable
On February 8th, the National Bank published January 2013 currency market data.
Foreign exchange market situation in Belarus is unfavourable for the National Bank. All economic sectors returned to a net demand for foreign currency. New potash supply contracts will mitigate the foreign exchange market situation, but the success of the first half of 2012 will not be repeated.
Since June 2012 the population became a net buyer of foreign exchange. The reason being is wages growth: nominal wages have increased by 65% compared with December 2011 and the official inflation rate 21.78%. In December 2012 in the wake of the increased devaluation expectations, population’s net demand for cash currency rose to USD 181.2 million
On January 1st, 2013 currency exchange rates have not changed significantly, thereby reducing the population’s demand for foreign currency. Partially, the reduced foreign currency demand can be explained by the increased utilities costs and increased prices for some goods (tobacco, alcohol), resulting in higher spending in local currency. In addition, high rates in the deposit market attract additional financial resources of the population, reducing pressure on the currency market. In 2012 the banking system was able to attract additional BYR 5.8 trillion in the form of term deposits.
Non-resident legal persons are traditionally foreign currency net buyers. Only in February 2012 they were net sellers of currencies due to the possibility of gaining rapid profit by selling foreign exchange and opening short-term BYR deposits in Belarusian banks at favourable rates. Compared with January 2012, the situation in January 2013 is very different: there are no fast profits from solvents sales and foreign debt payments are high. Given the circumstances, non-residents prefer not to risk with their currency resources.
Resident legal persons have reduced foreign currency supply. January is traditionally the weakest in foreign trade. Until January 9th, Russia is on holidays. Russia accounts for over 35% of Belarusian exports. The reduced number of working days reduces the turnover and currency proceeds. Potash shipments (one of the main Belarusian exports) started only after the contracts with China and India were signed on January 15th and February 6th respectively. Oil supplies to Belarus remain the same, but refiners find the domestic market more profitable than export sales which results in reduced foreign currency proceeds.
Thus, the foreign exchange market situation in Belarus is unfavourable for the National Bank. Foreign exchange net purchase by enterprises and legal persons was USD 327.4 million and only the fourth tranche from the EurAsEC Anti-Crisis Fund helped to keep gold reserves above USD 8 billion. There are no grounds to expect an improvement in the foreign exchange market. Potash fertilizers’ sales will only improve the situation in terms of reducing the foreign exchange net purchases, but will be unable to compensate for the reduced revenues from petroleum products (solvents, lubricants) and biodiesel.
The Belarusian authorities regard the Catholic conference as yet another international event to promote Minsk as a global negotiating platform. Minsk’s proposal to organise a meeting between the Roman-Catholic Church and the Russian Orthodox Church is rather an image-making undertaking than a serious intention. However, the authorities could somewhat extend the opportunities for the Roman-Catholic Church in Belarus due to developing contacts with the Catholic world.
Minsk is attempting to lay out a mosaic from various international religious, political and sportive events to shape a positive image of Belarus for promoting the Helsinki 2.0 idea.
Belarus’ invitation to the head of the Holy See for a meeting with the Patriarch of the Russian Orthodox Church should be regarded as a continuation of her foreign policy efforts in shaping Minsk’s peacekeeping image and enhancing Belarus’ international weight. The Belarusian authorities are aware that their initiative is unlikely to find supporters among the leadership of the Russian Orthodox Church in Moscow. In Russia, isolationist sentiments prevail.
In addition, for domestic audiences, the authorities make up for the lack of tangible economic growth with demonstrations of growth in Minsk’s authority at international level through providing a platform for religious, sportive and other dialogues.