Stanislau Bahdankevich: Belarus's foreign currency reserves are close to zero

Belarus can't maintain the exchange rate because it has no instruments to do it.

Former chief of the National Bank of Belarus Stanislau Bahdankevich spoke to Yezhednevnik about current processes in the Belarusian economy and the foreign currency market.

“All efforts of the government are aimed at preventing too rapid price growth. The exchange rate is determined by the market, demand and supply, the state of the balance of payment and trade rather than by the National Bank. I think today's events are closely related to the state of the country's economy. The economy is declining, and we can't expect the creeping inflation to stop. It can be suspended for a while if the National Bank takes a decision to restrict the growth of the money supply. The money supply in Belarus has increased by 21% for a period of slightly more than 6 months, and GDP has fallen by 4%. We don't have gross domestic product, while the money stock is growing,” Stanislau Bahdankevich said.

– Why does the Belarusian ruble continue to fall while the Russian ruble is going up? Can it be explained with the fact that our national currency is pegged to the currency basket?

– The currency basket is not the matter. The exchange rate depends on demand and supply on the currency exchange. The currency basket is just a landmark for financial authorities. I would say that it doesn't influence the exchange rate that always depends on supply and demand. I don't like that we always refer to Russia and its financial state. Belarus's export to Russia is only 37%. The rest part is paid in dollars and euros. Why are we constantly speaking about the Russian ruble and the poor economic situation in Russia? Is it so bad in other countries that have own national currencies? We shouldn't focus only on the East. We should trade in many directions, as our authorities have been saying for 20 years but do nothing. We also need to look at internal reasons for the deterioration economic situation in Belarus. Gas and oil prices are falling in Russia the situation is getting worse there. So what? We only gain profit from a decrease in oil and gas prices. We spend less power per production item. Oil price is dropping, but do we sell our own oil? In any case, we buy oil at the Russian domestic price and sell petrol and kerosene at international prices. They decreased, but you still can get profit. If you look at statistical data, you'll see that oil processing is Belarus's third profit-making sector after potassium sales and Gazprom's pipeline. But there's the feeling that we don't have the National Bank and the national currency and that everything is determined in Russia. We have our own economy, and we must work with it.

– How can you comment on Lukashenka's statement that Belarus cannot restrain prices? Aliaksandr Lukashenk also swore that the government did nothing “to restrain or bolster or weaken the national currency”.

– What concerns the exchange rate, I've already said what I think. We won't have a sharp devaluation. Our exchange rate is formed daily by supply and demand. We don't keep the exchange rate artificially, because we don't have instruments – our reserves are close to zero. Net foreign currency reserves of 1.5-1.6 billion dollars are too low. We pay 4 billion dollars on debts every year. The authorities really don't control the exchange rate, so we won't face a sharp decrease. But prices are growing because companies make products that cannot compete in the market. Look, we have a year's stock of trucks, 3- and 6-month stock of refrigerators, agricultural equipment and other vehicles. We produce it, but it is stored in warehouses. Meanwhile, people continue receiving wages. This empty money goes to the market and makes prices grow. It causes inflation and devaluation. We don't have a high inflation rate and devaluation now due to the positive balance of trade. If our statistical data are right, we sell more than we import. My conclusion is that the situation is bad, so we need to focus on economy.