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Stanislau Bahdankevich: Government Puts Pressure On National Bank

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Stanislau Bahdankevich: Government Puts Pressure On National Bank
STANISLAU BAHDANKEVICH

The refinance rate should be reduced simultaneously with holding reforms in the economy.

Former Head of the National Bank Stanislau Bahdankevich has told this in an interview to charter97.org.

– The National Bank reduces the refinance rate from 20% to 18% per annum since August 17. Why did they decide to take such a step in this specific period?

– I think this reduction is an expected one, as the economy remains in recession. To revive the economy, cheaper resources are required. Especially, when we talk about the conditions when the companies have eaten up their own working assets due to the previous loss-making activity.

That is why the government and the National Bank are trying to beat down the value of the credit resources for manufacturers, as the ruble has fairly stabilized lately. The National Bank considers that if the refinance rate is reduced now, it will not cause the inflation growth. The time will tell how it is going to happen.

In my personal opinion, I consider it necessary to reduce the refinance rate, but it would be better to wait for a while. The inflation has decreased during the summer time, and, according to the official data, it has become less than 1% last month, but it doesn’t mean it will remain at the same level, let us say, in autumn or winter. Therefore it would be better to wait for a quarter or two more, and then to reduce the rate.

At the same time, the way that the National Bank is following remains quite clear to me. The government puts pressure on it. Moreover, the enterprises are really incapable of taking loans by 25-30% with their extremely low profitability.

I understand these are forced measures, but, I repeat, I would wait for a while. Inflation still remains significant. I cannot say that the National Bank is making a mistake. Probably, in the conditions of the economic deflation it would not lead to the acute inflation.

– How will the refinance rate reduction affect the small and the medium business?

– The small and medium businesses also need cheap loans so it would give a positive impact to a certain extent. However, if the refinance rate reduction was conducted simultaneously with holding reforms in the economy by the government, it would have been absolutely correct. However, when the taxes in the economy are not decreased, the structure of the state companies’ management remains unchanged, the ineffective interference of the authorities into the activity of the real sector goes on, there is nothing we can hope for. When the government states that our model, which has proved its extreme ineffectiveness, is perfect, then, of course, this is leading nowhere. It is necessary to take measures on reforming the economy, to switch to the market railings, to minimize the authorities’ interference into this business, to change the taxation system, the system of management, so that the directive boards of big and small state companies would take their own decisions and bear responsibility for profitability in the first place, not for the gross output.

So, if Pavel Kalaur reduced the refinance rate alongside with all these processes, it would have been right, but if not, the measures just remain one-sided. They seem right from his angle, but I have doubts whether they will reach the goal, not leading to the inflation growth.

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