Economist: Lukashenka Is Wishful Thinking

Why did the dictator announce the "collapse of the dollar"?

From December 12, the National Bank will exclude the euro from the foreign currency basket. The reason is an increase in the volume of foreign trade with Russia and China and a decrease in trade with the EU countries.

The share of the Russian ruble will take 60% after the euro will be excluded from the currency basket, the dollar will take 30% and the Chinese yuan - 10%.

Meanwhile, on December 9, Aliaksandr Lukashenka said at the EAEU summit in Bishkek:

“It is already clear to everyone that the era of dollar dominance is ending. The future belongs to trading blocks, which will settle the payments with national currencies. Belarus and Russia have already moved away from the dollar in basic payments. It is important that other partners are actively involved in this process.”

Economist Leu Marholin, in a commentary for UDF, noted that the decision of the National Bank was correct.

What is the currency basket doing? It smooths out possible sharp fluctuations of the Belarusian ruble against other currencies. But the presence of specific currencies there is important when there is a significant trade turnover with the countries of origin. And since now sanctions have been imposed on the main positions of Belarusian exports to the EU, there is no revenue in euros, then it makes no sense to build the Belarusian ruble around the euro,” Marholin says.

The Chinese yuan replaced the euro in the currency basket. Is there any doubt about this decision?

“To answer this question, you need to know how many contracts and what volumes Belarus currently has with China, whether China buys and sells us something for yuan or prefers dollars. But since the National Bank has included the yuan in the currency basket, we can assume that the trade turnover with China in yuan is quite significant,” Marholin believes.

Is Lukashenka right when predicting the collapse of the era of dollar dominance?

“He is wishful thinking. I think his calls to other members of the EAEU to switch to settlements in national currencies will not have an effect. It is more profitable to carry out calculations in a freely convertible currency: often you need to sell goods in one country, and buy vice versa in another. And what will you do with the national currency on the accounts? She will lie idle. And the dollar remains a free currency, which can be used to pay with any country and for any product,” Marholin concludes.