Belarus’ ruble again trusted by Belarusians wishing to save

Lower interest rates on ruble deposits for the population have not resulted in ruble savings outflow from the banking system in Belarus. Such dynamics were possible due to the National Bank’s predictable BYR/USD exchange rate policy. The National Bank has accumulated sufficient reserves to maintain this exchange rate policy until 2015. In 2015, Belarus will support her financial stability with USD 1.5 billion from savings on export duties on oil products and with new domestic and international loans.

On September 12^th, the National Bank published data on changes in broad money supply in August.

The volume of public funds in short-term deposits in the Belarus’ banking system increased by BYR 1.3 trillion (BYR 0.1 trillion more compared with an increase in July). Circa BYR 1 trillion has been additionally accumulated on call deposits. Such a growth in ruble deposits persisted amid reduced interest rates on ruble deposits (in August the rate decreased by 1.5%-2%). In August, the population was a net supplier of foreign currency, which allowed the National Bank to pay off all the external and internal due debts and to increase the international reserves by USD 80 million. The population also placed some ruble funds received from the foreign currency sales in the Belarus’ banking system.

The situation when ruble savings increased amid reduced interest rates has become possible due to the National Bank’s exchange rate and interest rate policy. The population has limited instruments to invest extra cash. Currency savings have a profitability margin at 4-5% per annum on one-year deposits. The national currency depreciates by 1%-1.4% against the US Dollar every month. In September, ruble deposit interest rates were at 2.5%-2.6% per month. Thus, interest from ruble deposits not only compensates the Belarusian ruble depreciation, but also brings a high income.

This situation has been stable throughout 2014, which has convinced the population to keep their savings in BYR in banks at high yield.

In September, October and December the National Bank has to repay more than USD 1 billion on international debt. The National Bank has accumulated enough international reserves to make all due payments before 2015. In 2015, the government should receive additional USD 1,5 billion from savings on export duties on oil products produced from Russian oil, meaning that Belarus’ economy has much better prospects for 2015. However, Belarus’ calculations might be proven wrong, if oil prices continue to fall and (or) if Russia increases the tax on mineral extraction. Either factor might reduce Belarus’ budget proceeds.

The National Bank managed to lower the population’s expectations of devaluation due to the stable exchange rate policy. In turn, Russia will strive to reduce assistance to Belarus amid sanctions imposed by the West, which may prompt Belarus to seek additional funds to refinance her public debt in 2015.