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 regard the Catholic conference as yet another international event to promote Minsk as a global negotiating platform. Minsk’s proposal to organise a meeting between the Roman-Catholic Church and the Russian Orthodox Church is rather an image-making undertaking than a serious intention. However, the authorities could somewhat extend the opportunities for the Roman-Catholic Church in Belarus due to developing contacts with the Catholic world.
Minsk is attempting to lay out a mosaic from various international religious, political and sportive events to shape a positive image of Belarus for promoting the Helsinki 2.0 idea.
Belarus’ invitation to the head of the Holy See for a meeting with the Patriarch of the Russian Orthodox Church should be regarded as a continuation of her foreign policy efforts in shaping Minsk’s peacekeeping image and enhancing Belarus’ international weight. The Belarusian authorities are aware that their initiative is unlikely to find supporters among the leadership of the Russian Orthodox Church in Moscow. In Russia, isolationist sentiments prevail.
In addition, for domestic audiences, the authorities make up for the lack of tangible economic growth with demonstrations of growth in Minsk’s authority at international level through providing a platform for religious, sportive and other dialogues.