National Bank ignores Belarus’ economy losses from Russian rouble devaluation

April 22, 2016 18:59

Due to the economic slowdown in Russia, international sanctions, and low oil prices, the Russian rouble has devalued by more than 25% since early 2014. Belarusian exporters’ losses could reach into several hundreds of millions US dollars. However, the National Bank underestimates the threats to the Belarusian economy, and intends to preserve its currency policy in order to maintain stability on the foreign exchange market.

The Russian rouble exchange rate against the US Dollar has changed from RUR 32.66 per USD 1 on January 1st, 2014 to RUR 41.05 per USD 1 on October 18th, 2014. The Russian ruble’s devaluation by 25.5% was caused by economic slowdown in Russia, a significant outflow of capital from the country, and international sanctions which have led to problems with borrowing in the Russian banking sector amid the growing need to refinance a significant amount of external corporate debt. The situation has exacerbated due to a significant drop in oil prices, one of Russia’s main sources of currency.

Russia is Belarus’ main trading partner in foreign trade. In January – August 2014, Russia’s share in Belarusian exports was around one third - USD 10.8 billion of a total USD 29.3 billion. As of August 1st, Russian counterparties’ payables were approximately USD 2.4 billion. By weakening the rouble, Russia could reduce the debt to USD 2.1 billion. Producers of foodstuffs, petroleum products and engineering goods suffer major losses.

The National Bank’s currency policy envisages that the Belarusian rouble will weaken against the US Dollar without taking into account other currencies. In the context of the Russian rouble devaluation, the National Bank has two main policy options on the foreign exchange market. The first option is to weaken the Belarusian rouble against the US Dollar in order to support domestic exporters. Such a policy might result in problems on the domestic currency and deposit markets (which lies in the National Bank’s sphere of responsibility). The second option is to preserve the existing exchange rate policy. In this case, the population would maintain a high confidence in savings in Belarusian roubles and would continue to be the net seller of foreign currency on the domestic foreign exchange market. However, such a policy would inevitably lead to a decline in foreign exchange proceeds. But since that is not the National Bank’s sphere of responsibility, it may choose this option, even if it means reduced foreign exchange proceeds.

Belarusian exporters have already suffered huge losses due to the Russian rouble being devalued, and  their competitiveness on the Russian market has dipped. Nevertheless, the National Bank might choose to smoothly depreciate the national currency against the US Dollar, while reduced foreign exchange proceeds will be written off as the shortcomings of industrial and commercial enterprises’ sales departments. 

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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.