National Bank of Belarus concerned about foreign currency credits
Against the background of minor currency fluctuations, the sharp rise in interest rates in the credit market shifted enterprises’ focus towards borrowing in foreign currencies. Deteriorating economic situation in Belarus raises National Bank’s concerns about solvency of enterprises in terms of foreign currency borrowings. The newly introduced restrictive measure is designed to reduce the credit risk for the banking system.
On November 18th took effect the National Bank’s resolution No 577, which restricted foreign currency lending to Belarus-resident legal persons.
Lack of liquidity caused by the new obligatory reserve requirements resulted in a significant increase in interest rates on BYR loans. Interest rates in the interbank market increased from 19% per annum to 64% per annum. Therefore legal persons started borrowing in foreign currency at 9% per annum to meet their immediate needs. Thus, in September and October legal persons have increased their debt to the banking system by USD 790 million.
Shifting focus towards borrowing in foreign currency has increased the credit and foreign exchange risks for the banking system. Part of the foreign currency loans are long-term loans, which means that if foreign currency rate changes substantially, there will be problems with servicing these loans. In addition, the projected external debt growth as committed to the ACF EurAsEC in a letter of intent has already been exceeded, and further growth in lending is not desirable, because negotiations about the following tranche will start soon.
Therefore the National Bank has to find ways to restrict corporate lending in foreign currency. Lending in foreign currency for working capital purposes at the cost of the bank’s currency reserves has been restricted. However, if a bank has the opportunity to attract foreign capital from the foreign headquarters or from credit agreements with foreign partners, it is allowed to do so.
So, on the one hand, the National Bank reduces the pressure on the foreign exchange market by limiting the demand from the banks and legal enterprises and reduces the credit risks of the banking system – if there are any significant exchange rate fluctuations, and, on the other hand, ensures customers inflow to the banks, which offer borrowing in foreign currency, encouraging foreign currency inflow in the Belarusian economy. Thus, foreign contractors bear currency risks.
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.