The Government included an important caveat: the transition of foreign trade with Ukraine to exclusively Hryvnia format is not the final decision. For now, the two sides have agreed to consider the step and, as our enterprises intend to use the Ukrainian currency more actively, then it is right to expect a reciprocal show of respect in a more favourable attitude to the Belarusian Rouble. Our heavy industry manufacturers already use the Hryvnia actively in trade and have been following this system since April of this year without complaints.
The main question is, whether it is good for us to use a currency which is not the strongest in many respects, a currency that weakened by 280 percent in the last year? It seems this could be favourable. The Dean of the Economics Faculty at BSU, Mikhail Kovalev, explains, “The most important thing is that payments using Hryvnias would allow both countries to save hard-earned Dollars. The use of Ukrainian currency, certainly, will allow us to increase goods turnover between Ukraine and Belarus and to activate our falling foreign trade.”
For a long time the two countries have called each other strategically important partners, but trade has not been developing well for some time. The reason for that was not only the economic crisis in our region, but also the internal disorders of our neighbour. Following the events of January to April of this year, mutual goods turnover reached $950.8m, only 53.4 percent of the volumes fixed at the beginning of 2014. Certainly, the balance of foreign trade appeared positive for Belarus ($427m), but it is necessary to recognise that both import and export reduced almost by half.
It is clear that the Ukrainian enterprises interested in purchase of Belarusian machinery, but not wishing to spend ‘precious’ Dollars and Euros for it, will be more predisposed to make purchases. Besides, the Hryvnia as a unit of payment is favourable for Belarus as payments using this currency reduce the risk of non-payment. Unfortunately, accounts owing in trade with the Ukrainian enterprises, have become rather frequent phenomenon recently. Financial analyst, Valery Polkhovsky, comments, “The question of what currency to use in trade with partners should be considered by all economic and market participants. After all, the situation in the economy of Ukraine is very difficult and the Hryvnia-to-Dollar rate has sunk considerably. To take advantage of the opportunity however, it’s possible that businesses themselves would like to use a weak Hryvnia in payments with Ukrainian companies,” At the same time he cautioned that it would be beneficial to involve mechanisms to insure against currency risks at this point.
Recently our country has been actively promoting alternative currencies to the American Dollar in export-import transactions. For example, after the symbolic visit of the President of the People’s Republic of China, Xi Jinping, the Chinese Yuan began to flow in transactions. Even before that, the inflow of Chinese currency was not weak. The scheme is simple: we deliver Belarusian Roubles to the Chinese, while they use their currency, and using this money we actively buy goods from each other. The transition to Russian Roubles in trade with Russia however, has not happened for many years and our partners persistently sell us gas and oil for Dollars. Mikhail Kovalev commented, “If Gazprom and the Russian oil industry would use their currency in trade with Belarus, both countries would benefit.”
By Alexander Benkovsky