Barys Zhaliba: Three-Fold Devaluation Of Belarusian Ruble May Soon Follow

The risk of undermining financial and currency stability is being created in the country.

On July 1, the National Bank reduced the refinancing rate from 8 to 7.75% per annum. The reduction was not planned, but, in fact, it was done by the order of Lukashenka. They were given a command to ease the monetary and financial policy. According to the head of state, it's time to use the reserves accumulated for the rainy day: "today is a rainy day or it will be even rainier like in other countries."

The dictator has publicly appointed the chairman of the National Bank "chief assistant to the Prime Minister for salaries and work of enterprises." After that, the National Bank loses even formal signs of an independent regulator for external creditors such as the IMF and the World Bank.

It is clear that the main regulator can't solve the problems, accumulated in the Belarusian economy during the coronavirus pandemic, by reducing the refinancing rate alone. And the National Bank has sharply increased its support for the liquidity of the banking system. In other words, it increased lending to banks at reduced interest rates. From June 19 to 30, it invested Br1480 million in the banking system, while, for example, from January to June, the volume of regulatory operations to support banks' liquidity amounted to only Br678 million. That is, in 10 days it was many times more than in 5 months! Thus, there is a risk of undermining the financial and monetary stability, which the team of the head of the National Bank, P. Kallaur, has been carefully building since the time when the main regulator came to management in late 2014.

Surely, the credit money of banks, including the payment of wages, will be mainly given to state-owned enterprises, which are already overly indebted. Some of them spend up to half or more of their revenues on repaying the loans. Large enterprises in Belarus' regions have huge problems with debts. We are talking about hundreds of millions of rubles. Overdue accounts payable alone amount to over 8 billion rubles, the share of problem liabilities in the country as a whole has reached 15%. Naturally, banks do not want to become hostages of insolvent enterprises.

Attempts to stimulate the economy with the help of monetary methods can provoke waves of financial destabilization, as was already the case at the presidential elections in late 2010. As a result, a three-fold devaluation of the Belarusian ruble and twofold inflation followed in a few months...

Barys Zhaliba, Narodnaya Volia