“First Swallow” from Sanctions: Currency Collapse at Belarusian Enterprises

The public sector rushed to buy up the still available dollars and euros.

The population of Belarus has been selling foreign currency on a net basis for three months - July, August, and September - after 1.5 years of its net purchase. Moreover, in September, the monthly net sale of foreign currency by natural persons was the highest for the last 3.5 years.

Resident economic entities in July and August were also net sellers of foreign exchange. But, in September, they suddenly turned out to be its pure buyers, Infobank writes.

Moreover, the September volume of net foreign currency purchases by domestic enterprises turned out to be the largest this year: $ 179 million, which is only slightly less than the net sale of foreign currency by the population ($ 183 million).

Although, in comparison with the foreign exchange market of the population, where for 18 of the 21 months of 2020-21, the currency was bought on a net basis (net sales only in the last 3 months), the foreign exchange market balance of economic entities in Belarus has been much better all along. Of the 21 months of 2020-21, the net purchase was only at 10, September is one of them.

It turns out that, in September, business entities and individuals "changed places" in their roles in the foreign exchange market: traditional buyers became sellers and vice versa.

The net purchase of foreign currency by Belarusian enterprises in September - $ 179 million - is one of the highest even in the last 10 years for this month.

But for the period from the beginning of the year in this sector, the net sale of foreign currency is still maintained: in January-September 2021, business entities bought $ 558 million on a net basis. This is the highest value for this period in 8 years.

Before Belarus started buying oil from Russia at domestic Russian prices - until 2011 - the economy was buying much more foreign currency than it was selling: every month there was a net purchase of foreign currency - net demand for foreign currency.

Especially in 2010, which resulted in the very currency crisis of 2011.

For 10 years now, the difference between the price of oil and gas purchased from Russia and the world price of oil products and nitrogen fertilizers exported by Belarus, as well as all goods in the production of which oil and gas are used, has been estimated in billions of dollars a year in favor of Belarus.

That is what changed so the result of the currency market of the economic entities "in plus." It is true that every year the oil margin in favor of Belarus will shrink with the introduction of the so-called "tax maneuver" in Russia.

Although with the start of the EU sanctions on the export of oil products from Belarus, this will no longer matter: oil products will have to be sold only to Russia at the domestic Russian price. Well, or at best - back to Ukraine, if it does not join the sanctions.

Individuals make a significant contribution to the formation of the exchange rate, especially during a currency panic: the population at such moments can create such a huge demand for foreign currency that it will lead to the devaluation of the Belarusian ruble. This has happened more than once.

But it is the economic entities that make the main contribution to the formation of the exchange rate: the foreign exchange market of resident economic entities (domestic legal entities, individual entrepreneurs) is much larger: much more currency is bought and sold here than in the foreign exchange market of the population.

Individuals in September sold a record monthly volume of foreign currency - $ 1.019 billion, but Belarusian business entities sold more than twice as much currency this month - $ 2.278 billion.

Individuals bought up $ 836 million of foreign currency in September. And the subjects of the economy - residents - $ 2.458 billion - almost 3 times more.

Moreover, this volume of foreign currency purchases by enterprises in September ($ 2.458 billion) became the largest not only this year but also surpassed the highest indicator of August 2020.

And not only that: the excess demand for foreign currency on the part of domestic economic entities in September 2021 is one of the all-time records. More was only in pre-devaluation December 2010.

But the volume of sales of foreign currency by Belarusian enterprises and companies is now at a high level.

In July, a historic maximum was even recorded ($ 2.466 billion) - three months after the previous maximum ($ 2.441 billion in April).

September volume ($ 2.278 billion) is the 5th largest in history.

The amount of foreign currency sold and purchased by economic entities this year in September is a record for this month for all years.

The same is in the statistics for the period since the beginning of the year: both sold and bought foreign currency in the first 9 months of the year in 2021 more than ever before: the volume of the foreign exchange market has become a historical record in the sector of economic entities - residents.

There are the same record indicators of the sale and purchase of foreign currency by domestic economic entities and on an annualized basis.

For a rolling year (non-calendar year, for the last 12 months - from October 2020 to September 2021), by entities management - residents of Belarus:

sold foreign currency - $ 25.991 billion - a record amount.

bought foreign currency - $ 25.063 billion - a record amount.

But the rolling annual amount of net sales of foreign currency in this sector in September left a record position: a month ago, the best result in 8 years was created - $ + 1.157 billion.

In September, this indicator fell to $ 928 million: this is how much more foreign currency was sold by domestic economic entities over the past 12 months than it was bought.

Well, a year ago, there was the largest annual net purchase of foreign currency since 2011.

So, the economic subjects of Belarus in September suddenly became big net buyers of foreign currency. Although lately, they have more often acted as its net sellers.

Probably, in September, the state of foreign trade changed in a negative direction: if earlier this year, total (goods and services) exports each month exceeded total imports, sometimes by record amounts, which led to a greater supply of foreign currency on the market, then the foreign trade balance may have become worse in September.

It is quite possible that this is already the "first swallow" from the sanctions.