Bahdankevich: We can predict twofold or even the threefold devaluation
On August 30 at the meeting on socio-economic development of Belarus Alexander Lukashenko has announced the measures to stabilize FX market situation.
According to Lukashenka, the ruble rate to be "determined by supply and demand", and in mid-September, "all currency exchange offices run by banks will sell foreign currency to the population using the market exchange rate".
UDF.BY asked the former head of the National Bank Stanislav Bahdankevich and the head of the analytical center Strategy Leonid Zaika to comment on the president's statements.
- Lukashenko's decision to abolish the administrative control of the national currency rate, isn't it too late? Will this measures help in general to stabilize the economy and FX market or the time has been already missed?
Zaika: I think that if the government started "to move on" in March, it would be possible to fix a rate at around 3500-3600 rubles per dollar. Judging from today's meeting, some smart ideas come to Lukashenko's mind. But the current government acts too unprofessionally, because, before we talk about reaching the real exchange rate, we should talk about reducing the ruble money supply. One can not claim to stabilize in mid-September, and in November to promise the payments of 500 thousand for doctors and teachers. One must abandon any indexation and increases in tariff rates, loans to enterprises, to cut social programs. After this is done, and the Belarusian ruble has become "endangered species", then it is needed to state avowedly about trading in FX market and to stabilize the exchange rate.
Bahdankevich: For sure, the decision is late. All the voiced measures about six months ago were announced by the Belarusian macroeconomists, but no one was listening them. Finally, the authorities realized it. All these measures must be approved at the end of the last or at the beginning of this year. Although, it's better late than never. The last steps the authorities have done in the right direction. To reach the real exchange rate is the most important step to overcome the economic crisis, although, of course, everything will depend on what decisions and actions Lukashenko will take in the near future.
How do you think, what will be the market rate of the Belarusian ruble against the dollar, after the results of FX market trades in mid-September?
Bahdankevich: In terms of the "black" and "gray" markets, which exist today, we can predict twofold or even the threefold devaluation. It is difficult to name some exact number, as much depends not only on the market, but on what position the authorities will take up. I do not believe that the rate will be determined entirely by supply of and demand for the currency, without any attempts to fix it administratively.
Zaika: Belarusian ruble is now completely lost the confidence of the population. In order to talk about the tries to restore its credibility and to reach the real exchange rate, at first we should fire the people who brought the currency to such a state. If not, the ruble has to fall and fall. I, as the professional, should name the wrong numbers to disorient you, and try to play differently myself, but I won't do that.
- Lukashenko declared that the responsibility for stabilizing the economy are not only of the government and National Bank, but of the commercial banks too? How will banks and investors interpret such a massage?
Bahdankevich: I do not think there is something fundamentally new for the commercial banks in this statement. Banks have already used to fulfill the government's tasks of allocation the resources for lending to agriculture, to sowing and harvesting campaigns. We have never had the pure form of freedom for the joint-stock banks.
Another statement, which has seriously alerted many economists, is Lukashenko's proposal that the enterprises' "excess profits must be skimmed"? Do this measures remind you the surplus appropriation system of war communism times, and will it become the cause of business transfer in other countries?
Zaika: I'm never get tired to wonder the Belarusian authorities: first, they created the situation with rates multiplicity, and than they require business to help the state. I hope that our business has already nothing to fear.
Bahdankevich: Unfortunately, such measures are also not new in our country. Already two years ago, the National Development Fund has been created, where the excess profits of some enterprises had being withdrawn to in addition to taxes and credited to the fund. This has happened before. Of course, this negatively affects the investment climate and business, but it is better to ask the authorities, what they want to achieve in such a way.
- The president stated the population will have the opportunity to convert their ruble deposits in foreign currency. Is it real?
Bahdankevich: I think that's unrealistic. Even if something like that is done, it will only be with great limitations. We have had a lot of such statements in the last period, but they remained just statements. Although, they can create such a discount, that simply it won't be profitable for people to convert deposits in Belarusian rubles into deposits in foreign currency.