National Bank carefully relaxes monetary policy
According to the National Bank’s monitoring in 2012, Belarusian companies were reporting about slowdown in the demand, increased selling prices for products, increased production costs and insufficient circulating capital.
The National Bank’s monitoring showed that industry’s needs in loans had increased. Dramatic reduction of the refinancing rate can result in rapid growth of the economy borrowings in national currency. The National Bank’s ad hoc measures aimed at meeting the enterprises’ demand in crediting, combined with the currency market control, should result in gradual reduction in lending rates.
The National Bank’s monitoring of the real economy sector recorded deterioration of the general economic situation and increased demand in loans from GDP-forming industrial enterprises. In addition, government modernization programmes require significant financial inputs. Conclusion: the current interest rates on loans are unaffordable for enterprises.
However, the refinancing rate cannot be dramatically reduced to meet the enterprises’ needs in financial resources at affordable rates because of the high inflation in early 2013. If market is promptly injected with cheap loans, the result will be a sharp growth in lending in local currency that occurred in mid-2012, when annual interest rate on loans reached 19%. Inflow of cheap loans on the market against the background of the negative international trade situation will entail increased devaluation expectations.
On February 1st the National Bank cancelled the compulsory reservation of funds for the foreign exchange purchase, which enabled banks to free the resources previously frozen in the National Bank. On February 6th, the ban on long-term foreign currency loans not linked with export-import operations was lifted. Enterprises now can take long-term foreign currency loans at relatively low interest rates that currently prevail in the foreign exchange market. On February 6th, the National Bank sent out recommendations to Belarusian banks about how to improve banking operations’ efficiency. One of the recommendations, in fact binding, was to set margin on Belarusian ruble loans within 3 per cent points, aiming at reducing the interest rates on loans in Belarusian rubles.
Thus, the National Bank gradually softens tight monetary policy and simultaneously monitors the behavior of economic agents in the market. Dramatic decline in refinancing rate should not be anticipated, however, there will be gradual reduction in interest rates in the credit market and the affordability of loans for enterprises will be improved.
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.