Emission provokes inflation and devaluation
The monetary base in Belarus in January-July 2011 has increased by 35.4%. The volume of cash in circulation in January-July has increased by 57.1% to 7059.3 billion rubles.
The growth of cash in circulation resulted in growth of the “black market” exchange rate of US Dollar from Br 6300 in the beginning of August to Br 7700-8000 by 20 August. Non-cash US Dollar exchange rate increased up to Br 9000-9500 per USD.
Financial state of banks is deteriorating. The negative balance of net foreign assets of Belarusian banks on 1 August 2011 amounted to USD 5256.9 million, as compared with USD 5130.5 million on 1 July 2011 and USD 4247.6 million in the beginning of the year. In January-July gross foreign assets have increased by USD 48.7 million (3.3%) to USD 1534.5 million with liabilities growing by USD 1058.1 million (18.5%) up to USD 6791.4 million. Non-residential loans account for USD 5852.1 million of all liabilities, increasing from the beginning of the year by USD 841.1 million (16.8%). Debt on ruble and foreign currency loans is growing too. The National Bank of Belarus recommended (ordered) to the banks to ensure that their regulatory capital is increased by 15-21% by the end of 2011 and to maintain the share of distressed assets of banks in the assets subject to credit risk at the level of 8% maximum.
Continuation of the current emission policy results in the devaluation and inflation risks for the economy and affects balance sheets of the banks and businesses. However the government is yet unable to stop the emissive lending to industries and agriculture.
In the current situation it is important to exclude the National Bank’s interventions to keep the ruble liquidity of state banks and therefore to reduce the amount of financial support to the economy. Only after that one could try to achieve a single exchange rate of the Belarusian ruble. In addition, the unfolding economic crisis threatens the stability of the banking system. The banks are trying to solve the liquidity crisis via borrowing money from non-residential (parent) banks, however such policy has its natural restrictions.
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.