Setting is ready for discount rate reduction
On March 5th, the interbank market rates fell below 19% pa for the first time in 2013.
The government managed to convince the head of state to relax the monetary policy. The National Bank improved the banking system’s liquidity, which resulted in reduced interest rates in the interbank market. The February consumer price index permits the National Bank to reduce the discount rate gradually.
On March 1st, 2013 the Council of Ministers’ meeting set a task to converge interest rates on loans in local and foreign currencies. Due to high interest rates on loans in national currency (40% and higher) the state economic modernization programme has been jeopardized. Banking system will be forced to find internal and external reserves to provide for a low-cost supply of “long” money.
The National Bank has ensured the liquidity excess in the banking system in record-high volumes. As of March 7th, the volume of funds, placed by banks on National Bank’s overnight deposits was BYR 9.1 trillion. The funds were placed at 19% interest rate. The volumes of available funds in the banking system resulted in the interest rates at the interbank market falling below 19% pa – for the first time in 2013. In turn, banks continued reducing rates on individual deposits. This will result in lower interest rates on business loans.
To justify the discount rate reduction, the National Bank had to refer to reduced inflation. On March 7th, Belstat published data, quoting February CPI at 1.2%. In January-February, inflation was 4.3% and the pricing policy has been put under state control, which empowered the National Bank to announce the potential discount rate reduction. As a result, payments within loan agreements that refer to the discount rate will reduce.
Therefore, enterprises will receive access to loans at reasonable interest rates. Rapid decline in interest rates should not be anticipated, because the National Banks has grounds to be afraid of the sharp rise in lending in the local currency, which against the lack of success in the international trade and the potential growth of investment imports could deteriorate the currency market situation.
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.