Resuming Foreign Currency Loans - Confrontation Line between Government and National Bank

April 22, 2016 18:26

On February 13th, Prime Minister Myasnikovich advised about resuming foreign currency lending to private persons for housing construction.

Housing construction industry and the Government, which is interested in GDP growth, will benefit from lifting a ban on currency loans for housing construction however this step bears risks for the stability of the financial system. The outcome of the confrontation between the government and the National Bank on this issue will affect the country’s 2013 monetary policy.

National Bank’s Decree No 105 of July 14th, 2009 suspended lending to private persons. A complete ban on foreign currency lending was introduced on December 17th, 2010. The ban was introduced to stave off economy’s dollarization and to reduce risks for the banks and the population. The decision was made by then National Bank Head Mr. Prokopovich. Since then the National Bank’s attitude about the issue has not changed, regardless of appeals from banks and the Architecture and Construction Ministry.

It is proposed to lift the ban on foreign currency lending in the housing construction only. Justification for the lift is that housing construction requires substantial funding and that population has to bear the principal share in these costs. The population does not have sufficient funds and national currency loans are costly. Foreign currency loans’ interest rates were around 10-11%, which could encourage the population to borrow for housing construction. This is the way the government is planning to address the issue of the increased housing construction plan in 2013 (up to 6.5 million sq.m.) and the sufficiency of the population’s funds to pay for it.

The Government is aiming at GDP growth at the cost of the construction industry, bearing in mind low comparative base in 2012. Construction industry will receive the necessary funds and greater demand for housing construction, which could result in higher revenues for the construction companies. Construction is one of the few potential sources of GDP growth in 2013. However, the proposal contradicts the National Bank’s policy envisaging not allowing for economy’s dollarization. This step will not reduce currency risks, while foreign debt payments in 2013 are considerable. Under these circumstances, it seems unreasonable to spend scarce foreign exchange resources on improving the construction industry’s dynamics.

Thus, the National Bank is being rational and has a strong counter-argument against the Government. The Government aims to fulfill the projected GDP growth and lobbies its interests via Mr. Prokopovich, appointed Government’s representative in the National Bank. If Government wins, the National Bank’s position concerning tight monetary policy will weaken. If the National Bank manages to defend its views on the currency lending resumption, its influence and capabilities to carry out the necessary policies regardless of the Government’s position will increase.

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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.