Experts: The Option of Freezing Foreign Currency Deposits Becomes Real

What to do with money?

Belarusians continue to "take out foreign currency" from Belarusian banks on a very impressive scale. In August-September, the figure approached $ 1.5 billion. For the first time in the expert community, a discussion of a possible "freeze" of foreign currency deposits began in earnest. Meanwhile, there are defaults in the country: first political, then legal, next in turn - economic and financial. Where can Belarusians put their savings withdrawn from the banking system? Senior analyst of Alpari Eurasia Vadzim Iasub and private investor, financial expert Dzmitry Naryvonchyk, told Myfin.by about this.

A stocking and a pillow, not a bond

Each financial instrument has its own share of risk and return. Since the main reason for withdrawing money is the loss of confidence in the banking system, we asked Vadzim Iasub and Dzmitry Naryvonchik - is there any general advice for those who have withdrawn money from their accounts?

- The question is, does a person trust the Belarusian banking system in the current situation? Depending on this, options appear. If someone has confidence and he took the money because of low rates, then he can invest in bonds denominated in dollars - the same Ministry of Finance. This is a relatively risk-free option. If a person does not trust the Belarusian banking system, it is necessary to speak unambiguously about foreign jurisdictions. There is a serious fork in the road, but in any case, if the conversation is not about the banal transfer of the deposit, knowledge is needed, - said Dzmitry Naryvonchyk.

According to Vadzim Iasub, even bonds of the Ministry of Finance are now a risky option.

- If we talk about maximum safety, then this is probably cash "under the pillow." Because any type of investment does not guarantee the safety of your money. You can legally buy a lot in our country - from gold to cryptocurrencies, but purchased can both rise in price and fall in price. The "invest and earn" approach does not work in the event of attempts at financial speculation, - said a senior analyst at Alpari Eurasia.

If we lived in a normal country with a normal economy and normal law, we could recommend bonds to people. But in our realities, I will not undertake to recommend it either.

Real estate is not an option

The fact that the Ministry of Finance was unable to place its bonds on the domestic market and even stopped making these attempts confirms experts' words about the catastrophic loss of confidence. But then maybe those who took the foreign currency deposit and put money "under the pillow" try the option of investing in real estate?

- It is very difficult to give general recommendations without knowing the specific situation because everything is very individual. When I give consultations, I give a clear analogy: any investment is like clothes - it can be beautiful, comfortable, practical, but not suitable for a person due to size, body type, taste.

But even if a person, for example, does not have housing or needs to expand, and he saved money for this, then buying real estate is also not the best option now - because the price for it will fall, and significantly.

"This is confirmed not only by experts but also by similar situations that have repeatedly happened in different countries, including ours," said Naryvonchyk.

The private investor added that buying and renting real estate - a very popular option in the old years - also does not arouse his interest.

- Now the market is such that even those who used to specialize in the delivery of housing "for a day" almost without exception switched to long-term rent, increasing the already strong competition. There is no easy money there; the same can be said about commercial real estate and the prospects for this type of investment. Many companies that have moved out of the rented space will no longer return to these offices. The number of tenants is falling, while the number of business centers is growing. So I would be wary of calling this investment a good one.

Stocks? Overseas accounts?

The Belarusians have recently been able to keep their money in foreign banks. Can you take this opportunity? Or become the "wolf of Wall Street" and play on the stock exchange?

It is difficult to buy shares on foreign exchanges even legally - for this, you need the National Bank's permission. There is an option to do this through trust management services offered by some Belarusian banks. But in order to buy some shares, you need to understand the stock market because this type of activity does not give any guarantee of profitability at all. The purchased shares can both rise in price and fall in price - either in a short period or in a long game, - explained Vadzim Iasub.

He also does not consider the option of placing a deposit in a foreign bank attractive.

- Deposits have become available legally - now we have it allowed. But the fact is that it will not be possible to put money in more or less decent banks due to the pandemic. This can be done remotely, but only to banks with a murky reputation. Now everything is serious banks want to know their customers. Secondly, while the Belarusians are not used to this, and will not get used to it, in many foreign banks, especially first-class ones, a person must pay for keeping money in a bank, and not vice versa, - senior analyst of Alpari Eurasia upset potential depositors.

- We need to figure out who offers services for accessing foreign markets. If this is one of the Belarusian banks, the scenario is simpler, but if it is a foreign broker, then you need to obtain permission from the National Bank. Next, you need to understand how to form a portfolio - because the markets are volatile, and now they are especially unpredictable: the second wave of coronavirus, elections in the United States - these factors add uncertainty," said Dzmitry Naryvonchyk.

The country staged a legal default

What is the safest option for placing your hard-earned money?

- A legal default was made in the country, and this affected many areas, including the fact that there are no normal, reasonable, and safe ways to keep money inside the country. Even in the case of "keeping under the pillow," there is a risk - they can steal or rob, - answered Vadzim Iasub.

At the same time, the analyst noted that wealthy people usually consider any investment in financial instruments.

For those who have saved up $ 500 or even $ 5 thousand, all transactions in the market are expensive, and the costs will be higher than the income received.

"And in the West, people who are not millionaires usually keep money in their own country and do not consider financial instruments offered by other, often exotic, states," said Vadzim Iasub.

According to Dmitry Narivonchik, given that there is now pressure on the Russian and Belarusian rubles, it is best to consider portfolio investments in indices (historical data confirm this).

- If you first figure out why and how a portfolio consisting of index funds is formed. In the long run, in my opinion, this is the best option. But its complexity is high, - warned Dzmitry Naryvonchyk.

He believes that without knowing the level of financial literacy and other parameters, one should beware of giving advice:

If a person is not familiar with the financial market and is used to just putting money on a deposit, then the best option would be to sit out the period of instability in cash. Yes, he will not earn anything, but he will not lose anything, by and large.

There is a possibility of freezing foreign currency deposits

What's the bottom line? It turns out that the Belarusian has nowhere to attach money?

- In a country where the law does not work - this is natural, not surprising.

It would be strange if, during the legal default and the laws that were not working, the financial system functioned normally, which would provide citizens with a wide range of possible investments. It would be very surprising.

The law does not work; institutions do not work, there is no trust in them - this applies to all institutions, including the banking system, - concluded Vadzim Iasub.

At the same time, he believes that if there is no financial default, nothing threatens currency in banks. Otherwise, we may face a deposit freeze.

- The question is that the income there is close to zero. But if the situation comes close to the fact that the government will not be able to pay off foreign debts, there will be no currency for this, and no one will borrow this currency, then, in this case, the scenario of freezing foreign currency deposits or forcing their conversion into the national currency is quite real, - noted Iasub.

Storing money in national currency also has its own nuances.

- The rates have grown strongly in August-September and are now more or less normal. And if the Belarusian ruble was stable and inflation was not high, then even deposits in Belarusian rubles would bring a good income.

But if the government turns on the printing press, we will be waiting for a multiple devaluation, a multiple increase in prices and, accordingly, the money on ruble deposits will not save the value in any way.

What's the bottom line?

- It is impossible to predict whether the authorities will turn on the printing press. Although, little by little, it is being launched - by secret decrees, distributing money to unprofitable state-owned enterprises. If this practice is seriously expanded, then the jump in rates that we saw in August will become a permanent phenomenon, - Vadzim Iasub is sure.

The risk is not concentrated in any one financial instrument but depends on a person's actions and deeds, and it is impossible to give unequivocal advice. One thing is for sure - there are no safe harbors now, - Dzmitry Naryvonchyk stressed.