Incurring debt is very expensive

Banks are recovering from currency shocks and are gradually resuming consumer lending

Good news for those seeking a loan with which to purchase home appliances: banks are recovering from currency shocks and are gradually resuming consumer lending

Interest rates have risen considerably since December, making it more expensive to borrow money from banks. With rates reaching 65 percent per annum, even without additional duties or fees, it’s largely prohibitive.

In December 2014, the National Bank of Belarus recommended ceasing the growth of banks’ credit portfolio until February 1st, 2015, as part of a range of stabilising measures. However, restrictions were removed even earlier, together with the abolition of the 30 percent commission and other fees. Commercial banks are gradually resuming their lending programmes and soon all financial structures should be making loans more accessible.

Consumer loans will be among the first available, being modest in size, although with higher interest rates. Later, loans for the purchase of automobiles and property are likely to become more widely available (only BPS-Sberbank is currently offering such loans, at a rate of 60 percent per annum).

As to the wisdom of consumer loans, Liberal Club economics expert Anton Boltochko notes that inflation ‘eats’ interest rates but asserts that borrowers must feel certain that their loan (on which they are paying 50-60 percent per annum) will prove profitable. This need not be only financial. For instance, you may wish to buy a new computer, to raise your efficiency. Weigh up the cost and how the purchased item will change your lifestyle. Mr. Boltochko stresses that he’d wait a while, ‘as interest rates should fall at some point in the future’ from their current ‘prohibitive’ level. He recommends relying on your own savings.

“Our family planned to take out a loan of Br50m, wishing to redecorate the children’s room and buy new furniture,” Svetlana Shetko tells us. The young mother, on maternity leave, notes, “Frankly, it’s becoming frightful to become a borrower with such interest rates. Over the year, we’d pay back over Br100m. It’s probably easier to save the necessary amount or borrow from relatives, rather than applying to the bank.”

The National Bank explains that the supply of money to the economy is restricted through instruments of monetary policy, so that volumes of credit don’t disturb the macro-economic balance and financial stability.

By Galina Krutova

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