National Bank managed to overcome population’s devaluation expectations

The National Bank’s arrangements to encourage national currency savings by private and legal persons have proved to be effective. However, substantial foreign debt payments and a potential reduction in the international reserves in 2013, against the background of Belarus’ troubled international trade, could result in a rapid conversion of private and business BYR deposits into foreign currency.

On December 14^th, money supply data was published.

In August through October, international trade deficit in goods, according to the National Statistics Committee, was USD 1 130.8 million. Legal persons (residents and non-residents) were net buyers of foreign currency. Private individuals, due to wage increases, have become active foreign-currency buyers, increasing foreign currency deposits in the banking system. Devaluation expectations increased and affected the transition of ruble savings into foreign-currency savings.

Fearing the building up banking system risks, the National Bank has undertaken preventive actions to curb the growth of economy’s foreign currency debt, and has restricted support to the banking system’s liquidity. As a result, interest rates on foreign currency deposits decreased and increased on ruble deposits simultaneously, both for the population and businesses. Against the background of support to the national currency, a substantial gap in yield has developed between national and foreign currency deposits.

November financial data showed that the population and legal entities appreciated the short-term investment opportunities in national currency for their high and relatively guaranteed proceeds. In foreign currency, the positive effects will be achieved after the reverse conversion of BYR deposits. Term deposits in the national currency increased by BYR 2.9 trillion in November, which is an absolute record in several years. However, the current state of affairs should not be regarded as having long-term effects due to the deteriorating financial situation of the SOEs and the growth of receivables and payables.

Thus, the success of the National Bank’s arrangements in overcoming the devaluation expectations in the short term is noteworthy. However, substantial foreign debt payments and a potential reduction in the international reserves in 2013, against the background of Belarus’ troubled international trade, could result in a rapid conversion of private and business BYR deposits into foreign currency.