National Bank of Belarus is prepared to intervene at a supplementary session of BSCE

The National Bank of Belarus is prepared to use the country’s gold reserves in order to prevent speculative fluctuations of the Belarusian ruble exchange rate during the supplementary session.

Preliminary data says, in August the volume of gold and currency reserves of Belarus calculated by the IMF standards has increased by 10.2%. On 1^stSeptember it amounted to equivalent of USD 4.604 billion. This increase was due to the rising prices of gold (USD 187 million), as well as to USD 300 million Azeri loan.

The NBB has been preparing for the additional session at the currency exchange. Trial trades were held on 8 September. Unofficial reports say the exchange rate reached Br 9,800 per USD. The authorities claim that the main purpose of this trial trading session, which was attended by all Belarusian banks, was to introduce bank traders to the trading algorithm, rather than setting the exchange rates. The supplementary trading session has been scheduled for 14 September.

Comment

The National Bank of Belarus is prepared to use the country’s gold reserves in order to prevent speculative fluctuations of the Belarusian ruble exchange rate during the supplementary session. The modest size of the gold reserves and high pent-up demand for foreign currency imply that in a while the NBB will either abandon the supplementary session or conducts formal devaluation, or quickly replenishes gold reserves at the expense of loans or sales of large enterprises.

Vice-Premier Rumas avoided predicting the level of the USD market exchange rate, however said, “We will work hard on the exchange rate to be set by market mechanisms, on the other hand, the exchange rate should be acceptable to the economic players and the population”.

Nevertheless, regardless of the increase of the gold reserves by USD 426 million, its actual volume (without taking into account the Azeri loan and rising gold prices), has decreased by USD 26 million ((300 +187) -426)). The National Bank has undertaken several measures aimed to reduce the ruble money supply and held interviews with representatives of commercial banks. The NBB issued recommendations to large state-owned enterprises to sell foreign currency during the supplementary session with the main goal to reduce the demand and to increase the supply. Earlier the Head of the National Bank of Belarus said that the USD exchange rate will not exceed Br 10,000. Vice-Premier Rumas avoided predicting the level of the USD market exchange rate, however said, “We will work hard on the exchange rate to be set by market mechanisms, on the other hand, the exchange rate should be acceptable to the economic players and the population”. Therefore, in one way or the other the authorities are going to intervene at the BSCE session in order to prevent a sharp rise of the exchange rate. In anticipation of the supplementary session the black market exchange rate last week has declined by about 10%.