Balance is a priority

How will Belarus’ shift to a single currency exchange rate influence the economy?

By Anatoly Romanovsky

The exchange rate’s multiplicity is now in the past. The National Bank hopes that, in future, the Belarusian Rouble will gain strength, allowing inflation to slow down.

 

Will inflation fall five-fold?

Since early 2011, the national currency has been devalued by almost 190 percent (under the official exchange rate). Naturally, this has affected the prices. However, it’s hoped that the situation may improve. “In 2012, inflation may be held at 20 percent,” notes the Chair of the National Bank’s Board, Nadezhda Yermakova. To achieve this, the National Bank and the Government need to restrict loans while encouraging the public to deposit rising salaries and pensions with banks and to spend income on retail turnover, rather than ‘stirring up’ inflation and ‘untwisting’ the exchange rate. Ms. Yermakova believes that consumer prices will be significantly determined by our domestic enterprises’ activity.

 

Banknotes undergo reconsideration
The considerable rise in prices has inspired reconsideration of banknotes, with the National Bank suggesting that prices be rounded to the nearest Br50 (ending in Br50 or Br100). This would allow the gradual withdrawal of Br10 and Br20 denominations.

“Small amounts are too expensive for us to produce,” explains Ms. Yermakova. “We pay more for their printing, protection and transportation than they’re worth. A Br200,000 banknote has already been ordered and we hope to see it in circulation in early 2012.”  None are planned for this year but, in 2012, as Ms. Yermakova assumes, it’s quite possible that we’ll be using new notes.

 

Margin of strength

In future, the National Bank’s official exchange rate will float, being daily determined by Belarusian Currency and Stock Exchange trade. However, according to Ms. Yermakova, the National Bank plans to prevent sharp fluctuations by using national gold and currency reserves. By the end of the year, the latter will have been replenished by another $4bn ($2.5bn generated from the sale of Beltransgas shares to Gazprom plus almost $1.5bn of loans).

The public can help by selling foreign currency to the banks; in the past month alone, $386m more was sold to banks than bought.

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