Savings are more profitable than commercial activity
Interbank market credits rates hold steadily at 60%. Sales cost-effectiveness in the economy fell to 9% in August 2012. Profitability from BYR savings accounts exceeds profitability from many types of commercial activity. Long-term conservation of this situation would affect business activity. This imbalance bears high risks for the banking system stability and encourages banks to devalue the national currency.
Last week the banks raised interest rates on savings accounts, both for individuals and for businesses.
Most banks increased interest rates on ruble deposits by 5-10 % last week. Interest rates on BYR savings accounts for the population reached 49% per annum. For legal persons, short-term BYR deposits (10 days) were available at 50% and higher. Individual clients were offered special deposit terms for their free cash.
Simultaneously, the return on sales in the economy fell from 11% in July 2012 to 9% in August. 90.4% of the enterprises remain profitable, of which 40.5% have profitability margin 0% to 5%.
However, placing deposits and business production or trading activity are incomparable in terms of risks and costs. Production or trade requires numerous employees, office and warehouse premises, accounting, etc. Placing deposits and receiving profit from interest rates involves minimal costs and better guaranteed results, if national currency devaluation pace does not increase. There were no bankruptcies among Belarusian banks for a while. And the absence of checks by tax and other controlling authorities implies a guaranteed outcome when placing money on deposit.
Thus, with these interest rates, business activity in Belarus only makes sense for a small number of highly profitable enterprises. These include, for instance, potash production and sales, pipeline transport, and some other. In other cases, bigger profits can be made without any activity by placing funds on savings accounts. These rates in the credit market drag liquidity away from the currency market, but economic activity becomes unreasonable.
Over the past year, military-political relations between Minsk and Kyiv have become complicated. Due to their high inertia and peculiarities, this downward trend would be extremely difficult to overcome.
The root cause of the crisis is the absence of a common political agenda in the Belarusian-Ukrainian relations. Minsk is looking for a market for Belarusian exports in Ukraine and offers its services as a negotiation platform for the settlement of the Russo-Ukrainian war, thereby hoping to avoid political issues in the dialogue with Kiev. Meanwhile, Ukraine is hoping for political support from Minsk in the confrontation with Moscow. In addition, Ukraine’s integration with NATO presupposes her common position with the Alliance in relation to Belarus. The NATO leadership regards the Belarusian Armed Forces as an integral part of the Russian military machine in the western strategic front (the Baltic states and Poland). In addition, the ongoing military reform in Ukraine envisages a reduction in the number of generals and the domestic political struggle makes some Ukrainian top military leaders targets in politically motivated attacks.
Hence, the criticism of Belarus coming from Ukrainian military leadership is dictated primarily by internal and external political considerations, as well as by the need to protect the interests of generals, and only then by facts.
For instance, initially, the Ukrainian military leadership made statements about 100,000 Russian servicemen allegedly taking part in the Russo-Belarusian military drill West-2017. Then the exercises were labelled quazi-open and military observers from Ukraine refused to provide their assessment, which caused a negative reaction in Minsk. Further, without citing specific facts, it was stated that Russia was building up its military presence in Belarus.
Apparently, the Belarusian and Ukrainian Defence Ministries have entangled in a confrontational spiral (on the level of rhetoric). Moreover, only a small part of the overly hidden process has been disclosed. That said, third states are very likely to take advantage of the situation (or have already done so). This is not only about Russia.
The Belarusian Defence Ministry officials are restrained in assessing their Ukrainian counterparts. However, such a restraint is not enough. Current military-political relations between Belarus and Ukraine are unlikely to stabilise without the intervention of both presidents.