On 11 June the National
Bank of the Republic of Belarus Belarus
Payments are
carried out primarily through the Belarus Interbank Settlement System (BISS),
which is operated by the Accounting Center 1 January 2013 had 35 direct participants
and 103 indirect participants, operates Monday through Friday from 09:00 to 17:30 : Electronic payment documents and e-mails are
exchanged from 09:00 to 16:45 , and from 16:45 to 17:30 settlement is carried out among banks and between
banks and the central bank.
The data published
on 11 June for payment turnover in 2012 indicate that while the number of
payment instructions (платежные инструкции) increased only 2.1% in 2012,
from 188.3 million to 192.3 million instructions, the total volume of payments
increased by 63.0%, from BRY 6.246 qdln in 2011 to BRY 10.183 qdln (€ 898 bln)
in 2012. (On 31 Dec. 2012 one euro equaled
11,340 Belarusian rubles (BRY), and one USD equaled 8,570 BRY.)
The growth was
fastest outside of the central bank at commercial banks, where the volume of
payments increased by 73.7% in 2012, from BRY 3.838 qdln to 6.665 qdln, despite
an increase in payment instructions of only 0.6%, from 124,735,463 to
125,509,574 instructions.
The astounding
growth in the volume of payments is presumably due in large part to the episode
of hyperinflation that Belarus experienced in the second half of 2011 and the
first half of 2012, after the central bank first on 24 May 2011 devalued the
Belarusian ruble by 53.1% against the euro and 56.3% against the US dollar, and
then on 20 October 2011 abandoned the fixed exchange-rate system in favor of a
floating-rate system, causing the currency to lose an additional 34.2% in one
day.
(N.B.: According to
official inflation figures from the NBRB, the consumer price index in Belarus
Chairperson of the Board
(Старшыня Праўлення), NBRB
Separately, on 14
June the NBRB published updated data for average interest rates for new loans
and deposits in Belarus
In May trends from
earlier months continued, with lower inflation expectations for the BRY leading
to declining interest rates in all categories: deposits and loans, short-term
and long-term, legal persons and natural persons. The decline was sharpest in interest rates
for new demand deposits from legal persons, which declined from 14.2% p.a. in
April to 9.0% in May, and for new loans of over one year to legal persons, which
declined from 22.8% to 15.3%. The smallest
declines were seen in loans of up to one year to natural persons, from 33.8% to
33.2%, and in loans of over 1 year to natural persons, from 29.7% to 28.2%
The data also
include weighted interest rates for all foreign currencies lumped together. The demand deposit rate for legal persons,
which in recent months has been very volatile, in May jumped to 5.6% from 2.1%
in April. But because these data apply
to all currencies together, this jump could indicate a switch in new corporate
demand deposits from one currency to another, such as from the euro to the
Russian ruble. All other categories of
average deposit and loan interest rates in foreign currencies remained
virtually unchanged from April to May.
For instance the rate on new deposits of over one year from legal
persons rose from 5.4% in April to 5.6% in May, the rate on new deposits of
over one year from natural persons rose from 5.8% to 5.9%, and the rate on new
loans of over one year to legal persons rose from 8.9% to 9.0%.
Sources:
Структура платежного
оборота Республики Беларусь за 2011–2012 гг. (updated 2013-06-11)
NBRB resolution of implementing devaluation from
2011-05-24: Об
установлении обменных курсов при совершении валютно-обменных операций на
внутреннем валютном рынке: Постановление Правления Национального банка
Республики Беларусь от 23 мая 2011 г. № 188 (2011-05-23)
NBRB press release announcing free float of BRY from
2011-10-20: ПРЭС-РЭЛІЗ: О
введении единой торговой сессии (2011-10-18)
Inflation rate in Belarus
NBRB – Interest rates on the credit and deposit market:
Динамика
ставок кредитно-депозитного рынка (updated 2013-06-14)
NBRB – Explanation of methodology for interest rate
data: БЮЛЛЕТЕНЬ
БАНКОВСКОЙ СТАТИСТИКИ № 4 (166) (2013-05-22), pp. 246-247, “Таблица 4.6
Динамика средних процентных ставок финансового рынка Республики Беларусь”
In other news, on
12 June the International Monetary Fund published a country report on Belarus Minsk
The staff report
has strong words for the way Belarus Belarus Belarus Europe and high state control of the
economy restrains productivity growth and competitiveness. Short-term policy
efforts to boost growth beyond the economy’s capacity resulted in large
external imbalances and a crisis in 2011 and caused new volatility in 2012. The
authorities’ 8½ percent growth target for 2013 jeopardizes attainment of the 12
percent inflation target, and risks a repeat of the stop-go policy pattern of
2012.”
The staff report
strongly encourages the Belarusian authorities to pursue a policy of
privatization, price liberalization (removal of price controls), speedy dismantling
of social protections such as subsidized lending, utilities, and transport, and
accession to the WTO, predicting that the implementation of these structural
policies would bring considerable positive benefits to the country: “Structural
reforms would bring improved macroeconomic stability, competitiveness gains,
and increased flows of FDI. Indeed, previous staff analysis suggests that
deregulation to the level of Eastern Europe ’s most liberalized
economies could raise Belarus
Below are
reproduced verbatim the sections of the staff report that deal with monetary
policy and banking, with emphasis as per the original.
POLICY
DISCUSSIONS
[...]
B. Monetary and
Exchange Rate Policy: Focusing on Price Stability
17. The monetary
stance is at risk of being too loose. The authorities are aiming to achieve
12 percent inflation at end-2013 in the context of an incomplete monetary
framework centered on a short-term inflation objective with supporting
benchmarks for monetary aggregates, and a flexible exchange rate. A lack of
forward looking elements and the ad hoc use of multiple instruments—policy rates,
reserve requirements, and administrative measures—are key weaknesses of the framework.
The presence of large volumes of subsidized credit and the increasing
importance of foreign currency lending further complicate the conduct of
monetary policy. The current policy stance is difficult to assess, including
because of the sharp volatility in inflation in the first months of 2013.
However, unless the most recent declining inflation trend is sustained, the 12
percent target is likely to remain out of reach this year. Also, the marked
loosening of liquidity conditions in recent months on increased NBRB liquidity
support raises risks (Figure 6).
Policy Discussion
18. Staff urged the
NBRB to tighten liquidity conditions and stand ready to take further steps to
ensure disinflation. In the context of large uncertainty about the
likelihood of further inflation reductions—which will be needed to bring
inflation within the 12 percent target—and continued high inflation
expectations, a multi-pronged approach is required. First, the NBRB should tighten
liquidity to align the money market rate with the refinancing rate, and narrow
the policy rate corridor to reduce interest rate volatility. Second, it should
use macro-prudential policies to rein in high foreign currency lending growth
(see also below). Third, if the recent inflation reductions are not continued
over the next few months, an increase in policy rates will be needed to ensure
further disinflation. The NBRB should also raise rates without delay if
expansionary wage or directed lending policies were to jeopardize stability, or
if significant downward exchange rate pressures were to reemerge. The NBRB
should refrain from administrative measures to curb commercial lending rates, as
these obscure the policy stance and unduly inhibit the operations of banks.
19. The aim should be
for single-digit inflation by no later than 2014. In this context, staff encouraged
the NBRB to make progress toward adoption of an inflation targeting (IT)
framework but underscored that a successful eventual transition to IT would
require consistent macroeconomic policies and broader structural reforms,
including enhanced NBRB autonomy, sharply reduced directed lending, and
strengthening of market mechanisms in the financial system.
20. The flexible
exchange rate needs to be maintained to cushion against shocks and mitigate
external imbalances. Intervention should generally be limited to smoothing
excessive exchange rate volatility, while not obstructing the underlying trend
in the exchange rate. This said, given the low reserve levels and the absence
of indications of rubel undervaluation, the authorities should seize on
opportunities to build reserves during periods of appreciation pressures.
21. The authorities
shared staff’s concerns regarding inflation, but disagreed on the policy response.
The NBRB and the government conceded that the inflation outlook is
uncertain and that bringing inflation down to 12 percent by year-end would be a
challenge. The NBRB indicated it is therefore planning a cautious approach
regarding further monetary policy loosening. Given recent low investment and
GDP growth, however, it did not see a need for policy tightening in the near future.
The government suggested that inflationary pressures could be kept in check by
postponing planned administrative price increases, and it was preparing to do
so.
22. The authorities
reaffirmed their commitment to a flexible exchange rate. They agreed that
the exchange rate had been more stable than the inflation-differential with
trading partners warranted and acknowledged deteriorating competitiveness.
However, this phenomenon was ascribed to an increase in FX supply related to
high FX borrowing for rubel spending needs. The authorities also emphasized the
need for gradual exchange rate adjustments, given the heightened sensitivity of
the population to sharp rubel movements and the attendant risk of capital
flight.
C. Banking Sector
Vulnerabilities
23. Banking
supervision is improving but rapid FX lending growth bears close watching. Recent
improvements in the banking code that enhance supervision and improve corporate
governance in banks constitute progress in the institutional framework.
However, reported NPLs—which likely overstate true loan quality1—have risen considerably
suggesting ongoing asset quality deterioration. Even as the reported capital
adequacy ratios remain at seemingly comfortable levels, owing partly to
transfers of assets to the Development Bank, this calls for intensive
supervision. Meanwhile, rapid FX lending growth—spurred by the large interest
rate differential on rubel loans—is posing prudential concerns as much of the
lending is to unhedged borrowers. The NBRB has taken measures to curb the
growth, including though provisioning requirements and restrictions on banks’
short-term FX lending. However, their effectiveness has been limited and some
measures are under pressure as the government has called to end the NBRB’s ban
on FX lending to households, in a bid to revive mortgage lending.
1 Official NPL figures may
underestimate the true share of problem loans because of loan rescheduling by
state banks and a high share of government guaranteed loans.
Policy Discussion
24. Staff urged
consideration of further measures to curb FX lending growth. In particular,
staff suggested considering higher risk weights for FX loans. It also argued
strongly in favor of maintaining the prohibition of FX lending to
households—the elimination of which would risk exposing households to large FX
risks.
25. The NBRB shared
the staff’s concerns, but the government was more sanguine. The NBRB was
deeply concerned about FX lending growth and indicated it would consider
further steps, as suggested by staff, even though they considered their stance
as already very firm and worried about the potential for circumvention of
measures. The government, however, was more concerned about the stifling effect
on growth of the high domestic interest rates and argued that risks from increased
FX exposure were acceptable, given the need to boost lending and spur economic
growth.
Sources:
