Considered calculation
“We shouldn’t hurry to reduce the refinancing rate,” admits Ms. Yermakova, noting that the rate fell by 1.5 percent on June 10th (down to 23.5 percent). Further reduction will be discussed but the decision will depend on many factors: the general macroeconomic situation in the country, dynamics of prices and inflationary forecasts. If the rate is cut too soon it may negatively impact on Belarusian Rouble savings. “The refinancing rate is a tool of the National Bank, used to maintain stability on financial markets and in the economy in general. It needs to be treated with care and caution,” she adds.
Since April, inflation has slowed significantly. What will happen to prices this year and will we be able to meet our forecast parameters for inflation?
“According to our calculations, there is every chance of sustaining our inflationary forecast for this year, at 12 percent,” explains the Head of the National Bank. “Current monetary policy is helping. Last year, the influence of monetary factors on the inflation growth was at the level of 68 percent while, this year, we may see only 42 percent.”
At current inflation rates, we need to look at bank note denominations for next year. “With high inflation, denomination won’t bring the result and we’ll need notes with more zeros again,” explains Ms. Yermakova.
Following market rate
According to Ms. Yermakova, the emission of Br500,000 notes is yet to be decided but rumours of imminent devaluation have no basis. The exchange rate of the Belarusian Rouble follows the market, reflecting currency trade on the stock exchange; where demand exceeds supply, the National Bank intervenes to smooth out fluctuations. Ms. Yermakova stresses that stability takes work but that there is no cause for concern regarding ability to repay foreign debt, which remains within established limits. Belarus is well able to meet its internal and external obligations. Gold and currency reserves are able to cover two months of imports, standing at $8.41bn in equivalent, as of June 1st (calculated in accordance with International Monetary Fund standards).
