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November 7 – November 13, 2011

National Bank cannot afford stronger Belarusian ruble

The situation has not changed
National Bank cannot afford stronger Belarusian ruble

The Belarusian ruble exchange rate is declining and the National Bank does not have sufficient resources to maintain it. The NBB may replenish the gold resources at the expense of the second tranche of the EurAsEc Anti-crisis Fund credit if it was not forced by the EDB to raise the refinance rate up to the level of forecasting inflation rate.

Following the trades in a single session of an open joint stock company “Belarusian Currency and Stock Exchange” on November 4, dollar exchange rate increased by Br100 and reached Br8750. The Belarusian ruble exchange rate has fallen against the dollar by 3.5% (Br300) for four days. Reducing of the national currency cost occurs despite the use of an administrative resource by the National Bank of the Republic of Belarus. In such a way a postponement on payments for gas was received (which significantly reduces the demand for currency at the exchange). In addition, the National Bank gently regulates demand due to the removal (postponement) of key applications to purchase foreign currency as well as conducting “explanatory” work with bankers and management of large enterprises.

Reducing of the national currency cost occurs despite the use of an administrative resource by the National Bank of the Republic of Belarus.

Comment

The National Bank cannot afford to spend the gold reserves in order to maintain or control the exchange rate. Therefore, it has only the administrative resource at its disposal. It is possible to support the rate with substantial foreign currency earnings, but this is not yet foreseen. Moreover, the Belarusian exports in September reduced, according to preliminary statistics. It is possible to replenish the gold reserves of the National Bank due to the second tranche of EurAsEc Anti-crisis Fund. However, despite all the efforts made by the Belarusian side, the money incoming is being delayed, as the Eurasian Development Bank (EDB) warned national authorities as far back as on October 26, that there would not be any money until the benchmark is executed – the refinancing rate should not be below the projected level of inflation. This means the rate should almost double to a level of 50-60%, which would be a serious blow to the solvency of banks and their customers (and businesses, and the population). Under the circumstances the National Bank prefers an absence of credit.

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