Stabilization of the foreign exchange market and balanced exchange rate: not yet

April 22, 2016 17:58

Practice of supplementary trading sessions at the BCSE will continue for another month and the National Bank now expects to achieve a balanced exchange rate in the second half of November. The main causes of the currency crisis have not been resolved and without external financing a single exchange rate remains a dream.

The National Bank decided to continue with the supplementary trading session at the BCSE and envisaged the balanced exchange rate to be reached by the second half of November. For the first time since the introduction of supplementary trading sessions on the BCSE the National Bank had to intervene to support the Belarusian ruble on 6 October. On that day the USD exchange rate grew by Br 200 to Br 7810 (since 14 September the Belarusian ruble exchange rate grew by Br 1,000). The National Bank sold USD 13 million to meet the demand (supply was USD 6.5 million and demand – USD 37.56 million). Until this moment the National Bank was buying foreign currency at the supplementary sessions, filling its gold reserves. In the first two weeks of the experiment the GCR has increased by USD 103 million. On 7 October the Belarusian ruble depreciated again by Br 110 to Br 7920 per USD.

Chairman of the National Bank Ermakova said Belarus and Iran held talks about a USD 400 million loan from Iran. She also reported that Russia will provide Belarus with a USD 1 billion loan (most likely it will be secured by shares of Novopolotsk refinery, not "Belaruskali"). Moreover, the IMF mission started working in Belarus and will consider the issue of a new loan for Belarus, inter alia, in order to repay the previous loans.


The National Bank postponed the introduction of a balanced exchange rate, while it could do so as soon as tomorrow by using the administrative resources. The NBB’s decision stems from the unresolved underlying problems, i.e. the low trading volumes during the supplementary session, unbalanced supply and demand: exporters did not rush selling the currency, and importers - buying, hoping for a lower exchange rate (a priori, the balanced rate will be lower than the current).

Regardless of active state propaganda threatening with “cheaper USD tomorrow”, the population did not rush to sell the currency or to make ruble deposits at 30-40% per annum. Market imbalance became particularly obvious in the last days of the week when the National Bank had to intervene at the BCSE and the population queued up to buy dollars.

Regardless of active state propaganda threatening with “cheaper USD tomorrow”, the population did not rush to sell the currency or to make ruble deposits at 30-40% per annum. 

Given the circumstances, the National Bank had no other choice than to continue with the experiment of supplementary trading sessions hoping that eventually the situation would change for the better. Imbalanced exchange rate would require significant interventions of the National Bank of Belarus in order to have a unified exchange rate, which may bring the situation on the foreign exchange market to the level of the beginning of the year (increased demand from the population and enterprises). The National Bank prefers to bid its time, prompting exporters to sell foreign currency, and importers to buy at the current exchange rate, while it waits for opportunities to replenish the treasury by new loans or by the sale of “Beltransgaz”.

In the meanwhile, the authorities continue looking for money: external creditors understand real deals only, while the population could be “fed” with promises.

Particular attention should be paid to the words of the Head of the National Bank, who virtually said that Belarus intended to build a financial pyramid by using a new IMF loan to repay the previous one.


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The Belarusian authorities are attempting to strengthen some elements of the ‘Soviet’ education to ensure the ideological loyalty of new generations to the state. Most likely, one of the major tasks of the educational reform is to prevent growing discontent with the existing education system among the population. The educational reform aims to strengthen centralisation and adjust the system to the needs of the public sector.

In Belarus, the Ministry of Labour and Social Protection and the Ministry of Economy would determine the university enrolment figures.

The Belarusian authorities do not seem to have a long-term vision of the educational reform. The education system changes depending on who leads the Education Ministry and has access to President Lukashenka. For instance, former head of pro-government communist party and Education Minister Igor Karpenko reintroduced some "Soviet" elements to the school and strengthened ideological components along with the de-politicisation of the curricula. Current generation of students and youth have not spoken against the authorities, unlike previous generations raised during the Gorbachev thaw and socio-political transformations of the 1990s.

In addition, the Belarusian authorities are attempting to adopt measures aiming to prevent discontent among the population with the Belarusian education system. The authorities are mobilizing those nostalgic for the USSR and propose to return to 5-marks grading system, school uniforms and reduced curriculum. The Belarusian leadership also aims to blur the growing social stratification in society and to relax social tension due to the growing income gap between the richest and poorest.

Should the authorities adopt plans to reduce university enrolment, they would re-certify universities in order to close some of them and would reduce competition from private educational institutions. The Belarusian leadership is attempting to adjust the education system to the needs of the real economy, to reduce pressure on the labour market and to cut government spending on higher education for specialists low in demand by replacing them with graduates of secondary vocational schools requiring less time to train.