Economist on Decree on Currency Restrictions: It Means the Authorities Foresee This Threat

They know better the real situation with the currency, finances and inflation.

Lukashenka's decree allows the National Bank to impose currency restrictions in cases of threats to economic security and the stability of its financial system, up to a ban on the sale and purchase of foreign currency from July 9. It's adopted on April 20. Intex-press discussed the reasons for the innovation with economist Leu Marholin.

- The decree takes effect only in July, and only then the National Bank will be able to impose exchange restrictions. It's still unclear when exactly they will be introduced and whether they will be introduced at all. However, there's an important point: the decree says the currency restrictions will be introduced in case of a threat to the economic situation, financial stability, etc. So, the authorities foresee this threat, as they know better the real situation with the currency, finance and inflation.

Also, they actualized the effect of the law in advance. That is, given three months to those who, having read it, would run to convert the rubles to foreign currency. This wave has already had time to die out by July.

If the decree comes into force on July 9, and the National Bank introduces currency restrictions from July 10, then usual citizens will suffer differently. The careful citizens, those who do not keep large sums in Belarusian rubles and do not have ruble deposits, will not suffer much. However, those who fell for the 20% deposits and decided to earn on them, may suffer a lot. Due to the currency restrictions, the Belarusian ruble exchange rate will collapse. They will lack the 20% to compensate for their losses.

Of course, the people who have neither bank deposits, nor savings, i.e. those who live hand-to-mouth, will suffer the most. Any currency restriction will immediately cause a sharp spike in the dollar, euro and other freely convertible currencies. Plus, it will cause a sharp spike in inflation and, consequently, a rise in prices in stores. At first, it will be imported goods, but since we have the imported component in all goods (even bread and milk have their imported component), the prices will rise for them, too. The government will have no money to raise salaries and pensions. At least, until all costs are recalculated at the new ruble exchange rate, until taxes start coming in at the new exchange rate, etc.