Belarus changes structure of currency operations

Belarus changes structure of currency operations. 44466.jpegThe National Bank of Belarus is seeking an acceptable solution that would help to increase the inflow of foreign currency into the country and overcome the severe crisis. According to the latest changes, now US dollars and euros are accepted as payment for fuel at gas stations, hotels and tourist services. The authorities thus count on the growth of foreign exchange reserves.

On May 24, the National Bank of Belarus has depreciated the ruble by 36%. It reinstated the restriction on the volatility of stock in all market segments and refused to support the new rate with foreign exchange intervention, reports. The letter of the regulator says that in order to bring foreign exchange resources of the population to the economy of Belarus, the National Bank considers it possible to extend the list of cases permitting transactions in foreign currency with individuals.

According to the Rossiyskaya Gazeta, from now on the country is permitting, with some exceptions, financial transactions involving the U.S. dollars and euros.

The document prepared by the National Bank was distributed to local banks on May 25. It says that the citizens of Belarus will be able to use foreign currency at gas stations, as well as for payment for travel services. Foreigners will be able to use foreign currencies when paying for medical and educational services, services in the hospitality industry, and some other areas.

The devaluation raised the official dollar exchange rate immediately by 56% - up to 4,930 rubles from 3,155 rubles earlier. Anna Bodrova, an analyst of Investcafe, said that "even in mid-May there was hope for Minsk as it was conducting negotiations with Moscow on granting loans without which Belarus would not be able to get out of the situation it put itself into. The situation is remarkable in its simplicity: the official Belarus tried to negotiate the terms of the loan, but did not agree to make any concessions and did not offer any alternatives. Russia demanded guarantees, but there aren't any because the country has no monetary policy as such, and without that its sickly international (foreign exchange) reserves were depleted completely, because the Central Bank was trying to meet the demand for foreign currency. There were no programs to reduce costs and modernize the economy of the country. In short, Russia has not loaned the money. "

After that, the country's leadership was forced to give the market to free pricing. To date, the prices for food and household essentials in Belarus rose by over 50% in the period from mid-May to May 25. The prices of gasoline and other fuels rose by 30 - 50%. The prices have risen on taxi services and locally produced appliances. Citizens of the country are stocking up salt, matches, and soap. More affluent Belarusians are buying furs, leather, jewelry, whose price rose by over 30% in three weeks of May.

In the near future Belarus is expecting higher prices for pork and beef, reported. According to a recent decision of the Ministry of Economy, in May-June of this year, the maximum allowable price for beef increased by 10%, for pork - by 8%.

At the same time prices for beef of the first category are established by producer organizations in consultation with the customers, taking into account the market conditions. In addition, the document stipulates that the prices for bread and dairy products would remain the same. It is noted that economic change in wholesale prices is made in the amount of no more than 0.7% per month, and is not exceeding the maximum allowable prices.

Nevertheless, the agricultural products supplied to Russia are still sold at the old price. This has to do with the balance of supplies of Belarusian food that Minsk and Moscow agreed upon. These balances stipulate not only the volume but also the price "corridors", the Rossiyskaya Gazeta reports. Analysts believe that the Belarusian ruble can be protected against further devaluation and hyperinflation only by external cash infusions. Minsk is looking forward to the money from the EEC Crisis Fund at the amount of approximately $3 billion.

Due to the spring events in Belarus, the inflation can be expected to reach approximately 15%, said Deputy Economy Minister of Belarus Andrei Tur. "By June 1, the inflation for the first five months of the year will be approximately 15%," he said. However, he noted that Belarusian officials find it difficult to forecast inflation for the year, RIA Novosti reported. Last year, the situation looked much calmer and the annual inflation in Belarus was at 11%. The official projections suggest that in 2011 the inflation in Belarus will not exceed 8.5%, but due to the devaluation its growth can be greatly enhanced. Belarus has to reckon with the realities of today.

Valentin Gridin


Read the original in Russian

Author`s name Dmitry Sudakov