High interest rates halted consumer loans
On April 7th, the National Bank published data on individuals’ debt on consumer loans.
In 2012, amid rising real incomes, consumer lending in Belarus increased significantly. Interest rate under some credit agreements was over 100%, but a number of tricks were used to mask it. The government’s ban on hidden fees and commissions and the demand to show full interest rate resulted in slowdown in consumer lending.
In 2012, the volume of outstanding consumer loans in the national currency, grew from BYR 7.6 trillion to BYR 10 trillion or by one-third. Consumer loans in foreign currency were banned in Belarus since mid-2009. Strong growth in consumer lending is associated with increased incomes, aggressive advertisements of consumer loans by both, traders and banks, as well as not always proper actions of some banks, which were attracting consumers with extremely low rates while masking the real picture with high bank fees and additional payments.
On January 22nd, 2013 amendments to the Banking Code enforced a ban on the collection of additional fees and other payments under consumer loan agreements, other than the interest rate. The amendments proved to be effective. Since early 2013 consumer debt grew by 2.2% only, or BYR 218 billion. On April 1st, household debts on consumer loans was BYR 10.2 billion. The 80-90% annual interest rate on consumer loans, against the background of relative stability in the foreign exchange market stopped potential borrowers and forced them to review the feasibility of borrowing at high interest rates.
Thus, a number of banks, which have used tricks to mislead consumers, were unable to manipulate the interest rate, and consumers have become more financially aware. It is anticipated, that the consumer credit market will be reformed in favor of larger and, above all, state-owned banks. Banks, providing consumer loans services will have to revise their approaches in working with the population and seek for new operational opportunities to maintain the profitability.
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.