Belarusian anti-crisis plan and talks in Moscow

The central point of discussions this week is the situation with the opportunity to receive a $ 1 billion loan for budget support and a $ 2 billion loan from the Eurasian Economic Community for similar purposes.

To be able to receive these loans Belarus has prepared a Crisis Management Programme, which envisages tightening of the fiscal and monetary policy, potential increase of the currency corridor from 8% to 12%, reduction of financing of state programmes by 50%, etc. (the Programme is closed to the public).

Comment

The current position of Russia targets further loosening and stirring up of the situation in the Belarusian financial sector. The Deputy Finance Minister Dmitry Pankin said that the consideration and approval of the Programme could take up to 3 months, and that he heard nothing about the promised April credit line. The Russian Finance Minister Alexey Kudrin said he would look into the interim results of the analysis of the Belarusian Programme early next week. In the meantime Kudrin already said that Russia was not satisfied with the Belarusian proposals regarding devaluation of the Belarusian ruble.

Carrying out a one-time devaluation and its size are subjects of constant discussions among experts and bankers, as it has both advantages and disadvantages. Traditional benefits of the devaluation are more expensive imports and cheaper exports, which in both cases leads to the reduction of the trade deficit. However, the opponents of the devaluation (including the National Bank) indicate that the devaluation effect in the country will be exhausted in 3-6 months, while the fight against inflation caused thereof will take more time. Cons of devaluation include also high import dependence of Belarusian exporters (de facto, Belaruskali is the only net supplier of the foreign currency in the country, the share of imports in the export of oil refineries and engineering reaches 85%). In addition, currency devaluation and the subsequent withdrawal of the ruble deposits from the banks by the population would put the existing banking system in a serious danger. Significant devaluation (over 20%) carries political risks along with economic ones.

Therefore it appears that the National Bank will agree to the single-stage devaluation under extreme circumstances only (it might be forced to accept gradual and controlled devaluation under the pressure from Russia).

From the beginning of the year the exchange rate of the Belarusian ruble against the currency basket decreased by 7.13%, against US Dollar by 1.83%, against Russian ruble by 9.93% against Euro by 9.77%. In 2011 the corridor of fluctuations of the Belarusian ruble exchange rates against currency basket is set within +/- 8%.