National Bank of Belarus cancels the supplementary trading session on the Stock Exchange

On 26 April the National Bank reported, that there was no need to introduce an additional session at the Belarusian Currency and Stock Exchange.

The National Bank explained, “Opening of an alternative with respect to the main trading session requires considerable preparatory work of a technical nature, as well as creation of favourable conditions for sustainable and efficient operation of the supplementary session.”

Comment

Therefore we were proven right with our predictions. The NBoB postponed the alternative session, because 1) it could not perform as a full scale player during the trading session, and 2) chances were high that the rate would exceed the one “recommended” by the government: Br 4,500 per US Dollar, therefore de facto devaluating ruble by 50% (on Thursday, 28 April the NBoB withdrew its oral “recommendation”), and 3) commercial banks and enterprises have efficient legal schemes to circumvent various “recommendations” and work based on the currency rate determined by the demand and supply, bypassing inter-bank market.

Randomness and inconsistency of the decision-making at the highest level of the country speaks in favour of the lack or failure to have a clear vision of how and what to do and their inability / fear to explain what needs to be done to the president.

Indeed, in the first decade of May the banks will make single transactions of purchase and sale of foreign currency between their customers at the market rate of Br 4500-6000 per US Dollar. It is already clear that the long-awaited $ 1 billion of the Russian stabilization loan will be spent on critically depleted reserves of the BNoB as soon as it is received, and that the currency will not reach the exchange offices of commercial banks. On the one hand, it meets the strategic interests of the government for the moment being (“cutting” the consumption of the imported goods and restricting the currency export from the country), on the other, it jeopardizes the economy and provokes continuously rising discontent of the population.

A single currency exchange rate today means an uncontrolled devaluation, not feasible for political reasons. Accordingly, the authorities will try to keep the situation as it is by any means and will try to bring down the devaluation expectations after receiving loans and by selling assets. A single currency exchange rate today means an uncontrolled devaluation, not feasible for political reasons. Accordingly, the authorities will try to keep the situation as it is by any means and will try to bring down the devaluation expectations after receiving loans and by selling assets.

The recent initiative of the NBoB to meet the demand of the so-called currency requisitions of the third queue, i.e. to pay off foreign debts, confirms this trend. Very few of those in the need were able to purchase the currency for these purposes, however, before the long weekend those who need to pay the loans were reassured and would likely wait for another week, without pumping up the devaluation expectations. As a result, the exchange rate on the interbank market fell to Br 4800 as the upper margin (it was as high as Br 5300 on 28 April). The cash market has also adjusted itself downwards.

The National Bank has supported the tendency by expressing hope that the narrowing range of the currency rate fluctuations will become a sustainable trend.

However this policy is a risky business, a huge number of disaffected market players, facing the inability to repay the loans at the official rate, could inflate it to the new heights, increasing the gap between the official and unofficial exchange rate by 100% by the end of next week.