National Bank carefully relaxes monetary policy

April 22, 2016 18:25

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.

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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.