Belarusians Redeem Their Savings From Dramatic Devaluation, Says Economist

Are the Prakapovich times back?

Belarusians withdraw deposits from banks. Independent experts note other alarming symptoms in the Belarusian economy: the growth of corporate debt to banks, warehouse oversupply, a sharp drop in GDP.

How will problems in the financial sector affect the living standards of Belarusian families? Borys Zheliba, Doctor of Economics, answers the questions of Charter97.org.

- Financial analysts note that Belarusians are gradually withdrawing their savings from banks. What is the reason for this?

- It relates to the recent events in Belgazprombank. As the media reported, depositors have withdrawn one billion investments from the bank. Naturally, it caused a resonance and affected the behaviour of depositors in other banks as well.

The second reason is that our ruble devalued heavily. The height of it happened this March when the dollar was worth 2.60, and in January - 2.10. Then he played it back a little, but this devaluation has greatly frightened people who had revocable deposits and were able to withdraw rubles and convert them into currency or "piggy banks".

Today, one can say that the policy of de-dollarization, pursued by the National Bank, has already failed. Many people have once again revised their fx positions in favour of the dollar or the euro, moving away from the Belarusian ruble because of this devaluation, which was collapsing. People began to believe in a stable credit policy of the National Bank, but such events occurred against the background of the coronation crisis and lack of oil supplies early this year. Today, export revenues remain a quarter less than last year.

Therefore, depositors change their preferences for foreign currency again. Even though banks offer very low interest on foreign currency deposits, 0.5-2% per annum.

- Is there a threat to the country's financial system because of the withdrawal of deposits?

- There is a certain negative effect from the withdrawal of ruble depositors. It negatively influences Belgazprombank. However, the National Bank has already supported it with liquidity. So far, the banking system copes with its tasks. However, due to Lukashenka's order to lower the refinancing rate, reduce the cost of loans, which was immediately implemented, there are certain doubts that the National Bank will control the situation independently.

The banking industry is always risky. These may be both external and internal reasons. For example, we depend on the Russian market and oil prices, and foreign currency revenues. The revenue will be much lower this year. If the National Bank begins to pursue its monetary policy through a disproportionate reduction in the refinancing rate of bank interest, then, there is always the risk of significant acceleration of inflation and devaluation of our ruble.

- How can financial problems with banks and the state affect Belarusians? A record-high income-based split of the population has recently been recorded in our country.

- Yes, this gap is increasing. For example, pensions or the salaries of state employees are increasing in percentage terms. Let's say 5% of 2000 is more than 5% of 500 rubles. It turns out that pensioners and public sector workers are distancing from highly paid groups.

As for the rest of the salaries, these are the problems of employers at our enterprises. As far as I know, now the situation with salaries is worsening for the majority of the population, although the official statistics draws some "steady growth" - rather, nominal. To say nothing of the service sector, which suffered a lot from the pandemic.

I keep in touch with people from different fields of our economy. Their results dropped. The salaries of bankers have dropped because of a decline in clients. It affects the entire economy, the banking system and the incomes of most of the population of Belarus.

- Six major banks in the country - Belgazprombank, Belarusbank, Belagroprombank, Belinvestbank, Texnobank and Priorbank - have state representatives. What is this for?

- These measures are anti-market. This suggests further "nationalization" of private and other banks. This is the "centralization" the authorities have always been seeking sacrificing the economy. Recall that once "golden shares" were opened at large open joint-stock companies represented by officials who were at the shareholders' meeting.

This is a clear control of the state. Thus, the efficiency of the economy decreases.

- We used to hear quite often positive reviews of our National Bank, its monetary policy independence. However, Lukashenka has recently stated that the National Bank is responsible for the welfare of Belarusians and instructed to reduce the refinancing rate. The next day, the rate was lowered. What's going on?

- I can't say that this is the end of a balanced monetary policy, but before the "elections," Lukashenka decided to influence the National Bank. His recommendations are, in fact, orders. This is a really bad symptom.

All the successes of the National Bank in terms of the relative stability of fx rates can relate to the team of Pavel Kalaur and the fact that Lukashenka did not interfere with the policy of the National Bank as he did during the presidency of Piotr Prakapovich. Our monetary policy has become predictable and quite successful, unlike the work of the government.

However, direct interference begins right before the elections. If this continues, it will bring no good. As they say, we are already fed up with both inflation and devaluation. I would hate to go back to that.

The National Bank has rendered great liquidity support to commercial banks. That is, it has allocated a lot of cheap loans at lower interest rates. As the statistics show, the number of such loans issued this month exceeds that of the beginning of the year. This is already a bad sign, which results in the accelerated growth of the money supply. Therefore, there are high risks of price growth and devaluation of the Belarusian ruble.

If you like this article, you can support the website Charter97.org

MULTI-CURRENCY ACCOUNT FOR ASSISTANCE:

Bank's name: Bank Millennium S.A.
Address: ul. Stanislawa Zaryna, 2A, 02-593, Warszawa
IBAN: PL 97 1160 2202 0000 0002 1671 1123
SWIFT: BIGBPLPW
Name of the account holder: Fundacja “KARTA ‘97”
Purpose/title of payment: Donation for statuary aims

You can contact us by the e-mail charter97@gmail.com