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What Will Happen to Free Purchase of Currency in Belarus?

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What Will Happen to Free Purchase of Currency in Belarus?
Photo: Reuters

This has already happened in 2011 and 2014.

Journalists learned that the new draft law "On Currency Regulation and Control" includes a provision on the introduction of currency restrictions in case of threat to the economic security of the country. The authorities have repeatedly applied such restrictions in 2011 and 2014. Why did the authorities decide to protect themselves by such steps? Charter97.org asked economist Leu Marholin for comments.

- Given that our gold and foreign exchange reserves are constantly on the verge, at a minimum level, at any moment it may turn out that the gold reserves are not enough. No one can be sure that the holders of foreign currency deposits, primarily the Belarusian population, will come and demand their foreign currency deposits back at once. It means that reserves will simply not be enough, because there are much more deposits than reserves.

- Another factor of currency inflow is the public sector. How do you assess the risks associated with it?

- The public sector, except for the export of oil, oil products and transit, does not play a major role in foreign currency inflow.

- But about 20% of the foreign currency proceeds come from refineries, and the tax manoeuvre is about to be taken that will strike at oil refining.

- This is true, but it is not a surprise. You know, only unexpected things can damage you. As for the tax manoeuvre, everything was known.

All the losses related to the tax manoeuvre have been calculated. The function of the government is to find some compensatory mechanisms, which could compensate for this negative impact. I understand that the government is well aware of the danger posed by the tax manoeuvre.

- The spots when we had currency crises always coincide with election campaigns. Should we expect a currency shock next year?

- You see, the situation slightly differed then. Before the so-called elections, the country was flooded with ruble rain; it is like extinguishing a fire with gasoline. As of today, I do not see such unprofessional decisions in general. The so-called parliamentary elections were held; the presidential ones are coming. I don't think anyone will print any empty money, loans or raise wages and pensions. Therefore, we cannot expect the scenario of the year 2011 to reoccur. Of course, the presidential elections relate to some populist decisions, but I think this time their number will be minimal.

- Will such currency restrictions affect investors?

- Yes, because investors want to have freedom. If they bring their money to Belarus, they should have an opportunity to withdraw it at any moment. I do not mention free repatriation of profits, otherwise, it makes no sense for them to come here at all. Therefore, any currency restrictions hurt the investment attractiveness of this or that country. The freer the currency regime in the country, the more attractive it is for foreign investors. Not only for external but also for domestic investors.

Because domestic investors always have an opportunity to buy currency and invest it somewhere. It is possible to open an account in a foreign bank as well. Let it bring a lower percentage, but it will be safe. Or to invest this money in the economy, risking to face some restrictions that do not allow you to withdraw your money in time and dispose of it somehow. This is a risk.

- Does our economy need such restrictive measures?

- Of course, we can do without them; it is not a war or some kind of "great depression" and now most countries have learned to deal with crisis problems.

Yes, global crises are cyclical. They will happen. However, today they are not as significant as they used to be, and most countries have learned to fight them.

This is not higher mathematics. I think that if our government announces some possible limitations in case of a crisis, it means that it is not sure that the most important head of our country may initiate something that can have a drastic negative impact on the stability of the country's economy. By and large, there are risks, but if they are skillfully administered, no danger will arise.

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