Privileges under the mandatory sale of foreign currency earnings abolished
The Decree No 326 of 25 July 2011 "On issues of mandatory sale of foreign currency” abolished the privileges of the obligatory sale of foreign currency earnings. 30% of the foreign currency earnings fall under compulsory sale rule.
As of 25 July Belaruskaliy, Beltransgas, Belgorkhimprom, GPTO “Belaya Rus” and enterprises-refiners of cane sugar will have to sell 30% of their foreign currency earnings. Moreover, the rule will also be applied to the Belarusian Bar Association, innovation infrastructure enterprises and residents of scientific and technological parks, except for the High Technology Park. Also, 30% of foreign currency earnings should be sold by research and development enterprises (exporters and developers of IT services). The Decree abolished benefits for the foreign currency revenues from the purchase of government securities and securities of the NBB and foreign currency earnings to be transferred to the budget from the sale of resources released by the Armed Forces of Belarus. The text of the document is currently unavailable therefore it is not clear what enterprises will still enjoy the benefits.
Abolition of benefits within the compulsory sale rule is one of the requirements set for the Belarusian authorities with regard to USD 3-billion loan from the EurAsEC. Incentives applied to exporters - JSC "Belaruskaliy", CJSC “Belarusian Potash Company” (BPC), two refineries, and the Belarusian Oil Company and others resulted in sales of only 19% of the currency coming into the country. In anticipation of the heating season this amount is clearly not enough to cover the cost of critical imports and payments for foreign currency loans. At the same time, banking experts point out that the abolition of benefits for these enterprises will lead to a slight inflow of foreign currency to the foreign exchange, i.e. about $ 100 million. Taking into account the views of the new Head of the National Bank of Belarus and the Presidential Administration, experts do not exclude that the next step of the NBoB will be to increase the level of compulsory sale of foreign currency earnings.
Therefore, using various administrative constraints and expanding the scope of circulation of foreign currency (payments for imports, leasing, tourism, etc.), the authorities will try to keep the existing rate of Br 5000 per USD for all segments of foreign currency exchange market. Therefore they nevertheless adhere to administrative rather than market rules. However, without a substantial inflow of foreign currency to the country’s GCR, it has no prospects in the medium term (2012). Moreover, since currency at the “single rate” remains inaccessible for the majority of the population and businesses the recipients of the message about stabilization and single exchange rate are unknown. Government’s intention to strengthen the administrative regulation will automatically cut off Belarus from foreign donors and will make it even more dependent on the success of privatization of strategic assets. However, future investors are aware of this and in no hurry to buy. Therefore the authorities drive the country’s economy into a dead end, increasing the costs of future reforms.
Last week, Belarusian Foreign Minister Makei participated in the foreign ministers’ meeting of the Eastern Partnership and Visegrad Group initiative hosted by Warsaw. The Belarusian FM emphasized Belarus' interest in cooperation in the transport sector, which could be due to Belarus’ desire to export electricity surplus after Belarus finished construction of the nuclear power plant in Ostrovets. Minsk expressed concerns about Warsaw’s stance on the Belarusian NPP, as it refused to buy electricity from Belarus and supported Vilnius’ protest on this issue. Following accusations by the Belarusian leadership and the state media against western states, including Poland, of training "nationalist militants", Minsk did not agree on the visit of the European Parliament deputies from Lithuania and Germany to Belarus and to the NPP construction site near Ostrovets in particular. In addition, the Belarusian authorities have stepped up efforts to enforce education in Russian in Polish-language schools in Grodno and Vaukavysk. Should a rift in Belarusian-Polish relations persist, the Belarusian authorities are likely to step up the pressure on the Polish-speaking minority in Belarus.