Inflation can rise only from external causes

The Chair of the Board of the National Bank, Nadezhda Yermakova, has informed President Alexander Lukashenko of the situation on the currency market. How has the National Bank and the entire banking system been operating and how is their liquidity?
The President was clearly interested in issues of loan accessibility and the implementation of government programmes. “I see a trend in the refinancing rate falling, which is correct; we need to continue in this direction,” he asserted. “It’s beneficial both for the state and the economy and, therefore, for the public. Work in this direction should be continued.”

Mr. Lukashenko asked about the dynamics of public deposits and recalled that he had previously asked that subsidiaries and branches of foreign banks receive attention. He emphasised, “How are foreign banks working? I’ve received information that some behave just like foreign agents, in the full sense of the word. Businessmen complain that their company’s financial records may be copied and made available to customers. I checked this and it was confirmed. I asked you previously to look into this. What steps should be taken and do you need my intervention?” The President also drew attention to the fact that, if foreign banks enter the Belarusian economy, they must work for mutual benefit, rather than purely participating in projects of interest to themselves. 

Ms. Yermakova added, “Banks with foreign capital, mostly Russian, are working on our market, offering loans within the economy.” She explains that the monetary sphere is calm. Since the beginning of the year, the Currency and Stock Exchange has seen the National Bank purchase various currencies, worth $1.8bn. Enterprises are actively selling currency. In addition, since the beginning of the year, the public has sold $600m (net) of currency.

Recently, the amount of currency purchased by the public has risen for various reasons — including the need for money for foreign holidays. Ms. Yermakova notes, “In May, we saw a zero balance. In June, it was negative and, in July, the population bought even more. It’s a traditional trend, being holiday time. Also, population incomes have risen.”

The Head of the National Bank continued, “The situation regarding economic crediting is also normal. The banking system has liquidity and all banks have access to resources (in Roubles and foreign currency). The economy has access to money and credit growth is within prescribed limits. This means that there is no need to change or deviate from the calculations that we have made.”

The report concludes that the current refinancing rate (31 percent) allows for rising deposits in the national currency (without allowing excessive loans and with maintained profitability on deposits). The refinancing rate is gradually falling, as is connected with other economic indicators.

Ms. Yermakova adds, “We are controlling inflation by adjusting liquidity, withdrawing cash flow from the banking system and keeping the refinancing rate at a set level.” She notes that the first half year results show that inflation is steady and meets expectations.

“We do not foresee any problems or a change for the worse. If only the outside world doesn’t impact upon us (primarily the European Union) — since this could affect the solvency and the purchasing power of our enterprises and that of the markets to which we export. We’ll see. We shouldn’t see additional inflation from internal causes.”
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