The financial Utopia of Belarus

The rumors of an impending denomination of the Belarus ruble have been rampant in the country. However, at a time when the economy is recognized by leading audit agencies to be hyperinflationary, it would be senseless. Nevertheless, the government of Alexander Lukashenko is capable of doing it to strengthen the prestige of the national currency in the eyes of the citizens.

President Alexander Lukashenko of Belarus has built a system in which common sense finally gave way to the semi-official propaganda. In this regard, the logic of action of the authorities reminds that of their counterparts in North Korea. As Minsk is rapidly slipping in the international rankings of the creditworthiness, Lukashenko did not come up with anything better than to create his own credit rating agency, reports of which have become a counterbalance to the records of Standard & Poor's, Moody's and Fitch.  

The Belarusian Cabinet of Ministers together with the National Bank established an interagency commission to develop national scale ratings. The next step should be to create the appropriate state agency. There is no doubt that this will be done. However, it is hardly likely that the estimate of the Belarusian contestant of the great ranking trio would be widely recognized outside of Belarus. But he does not need it - the main thing is that his fellow citizens once again have seen a strong and independent position of the authorities that cannot be ordered by "the rotten West".

The same propaganda purposes will be pursued by a possible denomination of the Belarusian ruble, rumors of which emerged in the country in recent days. Some local media reports, citing "sources in the banking sector," reported that the monetary reform is scheduled for January of next year. Allegedly the new face value of the notes with be decreased by a thousand times, and they are already printed in neighboring Lithuania. In addition, it is assumed that for the first time in modern history, along with the Belarusian bank notes coinage will be issued.

The authorities were quick to deny this information. "This is a dishonest fiction, non-professional journalists," commented on the rumors head of Gdańsk National Bank Nadezhda Ermakova. Generally, everything is logical. Carrying out denomination in times of financial instability, when the world's leading accounting firms - PricewaterhouseCoopers, Deloitte Touche Tohmatsu Limited, Ernst & Young and KPMG - have unanimously recognized the Belarusian economy hyperinflationary is plain stupid. 

"The denomination must only be carried out when the government and National Bank are ready to affirm that in future they will not allow inflation and a falling exchange rate," the "Independent Newspaper" cited the opinion of the former head of the Belarusian Central Bank Stanislav Bogdankevich.

But, as is shown by the rating agencies, the opinions of foreign experts that do not agree with the vision of Alexander Lukashenko do not represent official values in Minsk​​. Yet, it becomes increasingly more difficult to prove to citizens of Belarus that the country's economy is developing steadily. The average salary of 2.5 million rubles a month is enough only for a couple of trips to a grocery store. A year ago, a million in local currency was worth three hundred dollars, now it is only a hundred. When you consider that the dollar also weakened during the year, the rate of depreciation of the national currency is even higher. In addition to these image considerations, one has to bear in mind the impracticality of the money. To make a small purchase, Belarusians have to go to supermarkets carrying entire bags stuffed with cash.  

And finally, there is another thing that does the future reduction of the nominal value of the Belarusian ruble nearly inevitable. The countrymen of Alexander Lukashenko have repeatedly witnessed that in all that relates to money, they need to draw conclusions directly opposite to what the president says. He promised that the devaluation will not happen - in one year it happened three times. So now we can expect that the assurances of the authorities will be the exact opposite. In addition, the denomination is perhaps the only measure of stabilization of public finances, in which the Belarusian President is well versed. During his presidency, he has done it twice - in 1994 and 2000.

Sergei Podosenov.

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Author`s name Dmitry Sudakov