Gradual depreciation of national currency unlikely to boost demand for currency from population
According to the National Bank, in June 2017, private rouble deposits increased by BYN 22.4 million, despite the BYN depreciation against the US Dollar by 3.7% per month. The US Dollar rate for the Belarusian population is a marker for estimating the volume of own savings; sharp changes in the exchange rate of the national currency significantly boost the demand for hard currency. Lower inflation and strengthening of the Belarusian rouble in January – May 2017 reduced devaluation risks of the population. The volume of private rouble deposits in the banking system is likely to decline due to lower interest rates on deposits. Interest rate policy on deposits is unlikely to change due to excess liquidity. A significant increase in corporate demand for rouble funds is unlikely due to the persistence of stringent requirements by banks to clients’ solvency. The major risk is a possible weakening of the Russian rouble, which makes 50% in the basket of currencies. Should such risks materialise, the National Bank would strengthen the national currency, in order to reduce the growth rate of the US Dollar and Euro to the Belarusian rouble.
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.