Setting is ready for discount rate reduction
On March 5th, the interbank market rates fell below 19% pa for the first time in 2013.
The government managed to convince the head of state to relax the monetary policy. The National Bank improved the banking system’s liquidity, which resulted in reduced interest rates in the interbank market. The February consumer price index permits the National Bank to reduce the discount rate gradually.
On March 1st, 2013 the Council of Ministers’ meeting set a task to converge interest rates on loans in local and foreign currencies. Due to high interest rates on loans in national currency (40% and higher) the state economic modernization programme has been jeopardized. Banking system will be forced to find internal and external reserves to provide for a low-cost supply of “long” money.
The National Bank has ensured the liquidity excess in the banking system in record-high volumes. As of March 7th, the volume of funds, placed by banks on National Bank’s overnight deposits was BYR 9.1 trillion. The funds were placed at 19% interest rate. The volumes of available funds in the banking system resulted in the interest rates at the interbank market falling below 19% pa – for the first time in 2013. In turn, banks continued reducing rates on individual deposits. This will result in lower interest rates on business loans.
To justify the discount rate reduction, the National Bank had to refer to reduced inflation. On March 7th, Belstat published data, quoting February CPI at 1.2%. In January-February, inflation was 4.3% and the pricing policy has been put under state control, which empowered the National Bank to announce the potential discount rate reduction. As a result, payments within loan agreements that refer to the discount rate will reduce.
Therefore, enterprises will receive access to loans at reasonable interest rates. Rapid decline in interest rates should not be anticipated, because the National Banks has grounds to be afraid of the sharp rise in lending in the local currency, which against the lack of success in the international trade and the potential growth of investment imports could deteriorate the currency market situation.
President Lukashenka continues to rotate staff and rejuvenate heads of departments and universities following new appointments in regional administrations. Apparently, new Information Minister Karliukevich could somewhat relax the state policy towards the independent media and introduce technological solutions for retaining control over Belarus’ information space. New rectors could strengthen the trend for soft Belarusization in the regions and tighten the disciplinary and ideological control over the student movement in the capital.
President Lukashenka has appointed new ministers of culture and information, the new rector of the Belarusian State University and heads of three universities, assistants in the Minsk and Vitebsk regions.
The new Information Minister Karliukevich is likely to avoid controversial initiatives similar to those former Minister Ananich was famous for, however, certainly within his capacities. Nevertheless, the appointment of Belarusian-speaking writer Karliukevich could be regarded as the state’s cautious attempt to relax environment in the media field and ensure the sovereignty of national media.
The Belarusian leadership has consolidated the trend for mild Belarusization by appointing a young historian and a ‘reasonable nationalist’, Duk as the rector at the Kuleshov State University in Mogilev. Meanwhile, while choosing the head of the Belarusian State University, the president apparently had in mind the strengthening of the ideological loyalty among the teaching staff and students at the main university in order to keep the youth movement at bay. Previously, Korol was the rector of the Kupala State University in Grodno, where he held purges among the disloyal teaching staff.
The trend for the renewal of mid-ranking executives and their rejuvenation has confirmed. The age of the Culture Minister and three new rectors varies from 39 to 44 years old.