Suspended oil revenues resulted in problems on the currency market
In September, the National Bank’s gold reserves held out at the target level: over USD 8 billion. However, a significant deterioration in external trade and Belarusians’ expectations that the BYR will devalue will force the National Bank either to abandon the international reserves target level, or the BYR exchange rate for 2012.
On September 5th, the National Bank published a foreign exchange market in January-September 2012 report.
At the end of September 2012 the population, which was a currency net seller for eight months of 2012, became a currency net buyer. On a net basis the population bought USD 365.6 million in September.
On a net basis non-residents bought USD 75.6 million. Until August, legal entities were the major currency sellers. Excess of currency supply over demand enabled the National Bank to fulfill its internal and external obligations without dipping in the gold reserves. Belarus’ external debt due to successful foreign trade in the first half of 2012 has reduced by USD 882.1 million.
In August 2012 the situation changed substantially. Suspension of supplies for solvent’s exports and problems with biodiesel supply significantly curtailed Belarusian exports. Planned engineering works at “Naftan” have reduced volumes of crude oil refining. As a result of these unfavorable factors, August was the first month this year with a negative foreign trade balance.
In September 2012, the situation continued to deteriorate. Biodiesel supply has been suspended almost entirely. Solvents were not exported. Export volumes of lubricants reduced significantly. As a result, Belarus lost revenues from solvents and lubricants exports. This was bound to affect the currency supply at the Belarusian Currency and Stock Exchange, which sank to the February 2012 level.
Concerned about downbeat economic news, the population resorted to the proven scheme: started accumulating currency for the sake of saving. There are no internal available sources to replenish the country’s foreign currency reserves. Therefore the National Bank forces banks to sell foreign currency by increasing contributions to the reserve fund, applicable to raised foreign currency, not leaving anything for market liquidity. In addition, most probably the National Bank borrowed currency from non-residents for a short time in order to hold up the international reserves’ level.
In the meanwhile, improvements in the foreign trade are not feasible. The National Bank will either has to weaken the BYR at a faster pace than in September, which may have an adverse affect on the volume of deposits in foreign currency in the banks, or to resort to gold reserves’ spending due to the unavailability of substantial loans in the near future.
The Belarusian authorities could to step up the opposition representation in local councils, should party members demonstrate potency. The Belarusian leadership is unlikely to have the resources to ensure 100 percent pro-government candidates in the local elections. The authorities have exhausted the grassroot support and have no funds to pay for the loyalty.
The Belarusian Central Election Commission has proposed to hold the elections to the local Councils of Deputies on February 18th, 2018.
The president has repeatedly emphasised the importance of the local councils in the power system and the state machine always tried to ensure the necessary local election results. Candidates have been decreasing in number with each elections and the authorities dealt with that by reducing the deputy corps. That said, during the rule of President Lukashenka, his electoral base has changed substantially. Over the past decade, most Belarusians have moved to cities and lost their local roots. The rural population is ready to support the president, but rural residents are constantly decreasing in number.
The Belarusian leadership is likely to permit broad participation in the election campaign and an increase in alternative representatives in the local councils. However, the opposition would have to boost its activity, so as so far it has been passive in defending its interests. In addition, the authorities, while determining the date for the local elections, have taken into account the fact that the opposition is usually the least active in the winter time.
Overall, both, the opposition and the local authorities have exhausted their grassroot support, however new local leaders may still come on political stage, although the party opposition has not yet shown sufficient aspirations.