By Alexander Boldyrev
The National Bank of Belarus has decided to ‘freeze’ its activity for some time, believing it has done all it can to preserve and expand the country’s gold-and-currency reserves. Accordingly, the topic should calm naturally.
In early March, the country’s economy faced a sharp rise in demand for currency from individuals and businesses, caused by fears regarding a possible one-time devaluation. Against a background of rush and excitement, the National Bank had to implement several unpopular measures to regulate the situation. Afterwards, the country’s chief financial institution decided not to adopt additional restrictive measures in the sphere of foreign currency regulation and foreign currency control.
Meanwhile, the National Bank notes that ‘it completely excludes the idea of a one-time significant correction of the Belarusian Rouble exchange rate and, if necessary, is ready to consider and implement other measures, enabling it to correct any foreign imbalance’.
Major catalysts of the growing foreign trade balance include rising customs duties on imported vehicles (from July 1st, 2011) to match those of Russia; this will make second-hand cars more expensive, with many Belarusians deciding to buy cars ahead of time to avoid the extra duty (for resale or for themselves). Accordingly, demand for foreign cash has increased. Remarkably, the current situation repeats that of last year, when citizens awaited rising customs duties from July 1st, 2010 (which never appeared).
The preparatory stage has been challenging for the currency market, with over $1.5bn of cash flowing out of the country in one year alone. According to analysts, the present figures may be even higher. “Citizens import too many cars and are often unable to resell them. Once sales begin, preferably to Russia or Kazakhstan, the situation will improve, with Belarusians bringing their earned currency back to banks,” notes Mikhail Kovalev, the Dean of the Belarusian State University’s Economic Department.
The Head of the Association of Belarusian Banks’ Analytical Centre, Felix Chernyavsky, assesses the anti-crisis measures of the National Bank as positive. “The institution has managed to stop the outflow of our gold-and-currency reserves,” he notes. Economists believe that the efficiency of measures adopted by the National Bank depends on how serious budgetary policy is. The Government notes that, soon, the state investment programme will be cut back, with construction projects viewed as less important being shelved until better times.