Belarusians prepare for devaluation
The National Bank’s data suggests that the NB’s efforts to reduce the devaluation expectations among the population have failed – people have started converting their rouble savings into hard currency. Devaluation appears inevitable, even if Belarus receives new loans.
In November, the population changed their views on the Belarusian rouble’s stability. In November the outflow of rouble deposits from the banking system was record-high. People converted their roubles into US Dollars and Euros, which led to record-high net purchases of cash and non-cash foreign currency. The population acquired about USD 325 million in total, which led to Belarusian international reserves depleting in November.
With these actions, the population attempted to secure their savings. The population noted the devaluation in Russia and logically assumed that similar events could happen in Belarus in the short term. The population started converting roubles into US Dollars regardless of the National Bank’s significant efforts to reduce the devaluation expectations. In November, the Belarusian rouble was as stable as ever (rouble devalued only by BYR 90), deposit rates went up to 30% per annum, and there was no shortage of foreign currency in the exchange offices. Nevertheless, the population’s fears have not gone away. The difference between the BYR/USD exchange rate in the exchange offices and the National Bank’s exchange rate demonstrates there is a persistent demand for the international currency in Belarus.
The National Bank might escape devaluation only if Belarus receives new large enabling her to meet the increased demand for foreign currency for a specified period. However, that would not resolve the issue of slumped Belarusian exports to Russia (make up to 42% of total exports). If the current exchange rate policy persists, the negative trends in foreign trade might also increase. A number of industrial enterprises might suspend their activities, social tension might grow and international reserves might reduce to a critical level. Unfortunately, devaluation of the Belarusian rouble (within the margins of the RUR devaluation) would not solve all the problems in the Belarusian economy. The Belarusian economy requires structural reforms, especially in private property, but the Belarusian leadership is not susceptible to such measures.
The population realistically assesses its risks in terms of rouble savings depreciation and seeks to minimize potential losses from future devaluation. New borrowings can only delay the moment when the country’s leadership would be forced to devalue the national currency.
The Belarusian authorities regard the Catholic conference as yet another international event to promote Minsk as a global negotiating platform. Minsk’s proposal to organise a meeting between the Roman-Catholic Church and the Russian Orthodox Church is rather an image-making undertaking than a serious intention. However, the authorities could somewhat extend the opportunities for the Roman-Catholic Church in Belarus due to developing contacts with the Catholic world.
Minsk is attempting to lay out a mosaic from various international religious, political and sportive events to shape a positive image of Belarus for promoting the Helsinki 2.0 idea.
Belarus’ invitation to the head of the Holy See for a meeting with the Patriarch of the Russian Orthodox Church should be regarded as a continuation of her foreign policy efforts in shaping Minsk’s peacekeeping image and enhancing Belarus’ international weight. The Belarusian authorities are aware that their initiative is unlikely to find supporters among the leadership of the Russian Orthodox Church in Moscow. In Russia, isolationist sentiments prevail.
In addition, for domestic audiences, the authorities make up for the lack of tangible economic growth with demonstrations of growth in Minsk’s authority at international level through providing a platform for religious, sportive and other dialogues.