Moscow demands of the National Bank of Belarus to increase the refinancing rate to 100%
After Belarus had sold the last 50% of Beltransgaz to Gazprom for $2.5 billion, Aleksandr Lukashenka was poured with golden rain.
At first he was promised $10 billion loan to build nuclear power plant, and on Monday EurAsEC Anti-crisis Fund's (ACF) Council approved the second tranche of the financial loan of $440 million "to support pants".
It's assumed, this money will be transferred to the National Bank of Belarus in December. However, Moscow reminded to Minsk, that it would be good to fulfill a few conditions of its receipt.
"It will happen automatically after President of Belarus signs a decree to transfer non-core assets of the National Bank, as well as to increase the National Bank's rate on liquidity instruments in December 2011 by 5% from the current level", said in the press release of the Eurasian Development Bank, running EurAsEC ACF.
The problem is that today's refinancing rate of the National Bank is 40%, while inflation has already exceeded 100%.
If to strictly follow the requirements of the EurAsEC ACF, then Minsk has to raise the refinancing rate by 2.5 times, which will bankrupt most businesses at once, and also will generate a wave of nonpayments on consumer and housing loans from the population.
"Obviously, to defeat inflation, the refinancing rate must be raised. It is needed to make loans even more expensive, to lessen applications for lending. We must reduce domestic demand by restricting lending money.
The refinancing rate is not calculated, it mustn't be lower than inflation. When the annual inflation rate is 100%, the rate should be at least 100%", former head of the National Bank of Belarus Stanislav Bogdankevich said in an interview with UDF.BY.
The expert also notes that in Belarus the real interest rates on borrowed funds are already much higher than the official ones.
"Our banks have very large commission payments of customers, debtors. Therefore, if the loan is issued at 50%, then with the commission fee for registration, for issuance and so on, it will cost at 80%. If they adopted a law which says the fee should be limited to some degree, it would be correct".
At the same time, the former head of the National Bank believes, that raising the refinancing rate, which the EurAsEC Anti-Crisis Fund insists on, won't apply to loans issued before.
"I think, people (companies) who have taken loans at rates approved earlier, can sleep peacefully, because to raise it (rate - udf.by) retroactively is absolutely wrong. I understand, sometimes the interest rate on loans is floating and linked to the refinancing rate - this is not entirely correct. Here restructuring of the rate is needed, its reduction. It cannot be increased to the same extent the refinancing rate increases, as this will damage the bank, which granted a loan", the expert said.
Bogdankevich thinks, the National Bank "should unbind the interest rate from the refinancing rate on the loans issued earlier, and to conclude new loan contracts".
"Those contracts, which were concluded on previous conditions, previous interest rates, should be executed", he says. "And those costs, a bank will incur, it will close at the expense of its insurance funds, or write off this difference at a loss. It is wrong, when a bank shifts its miscalculations onto a debtor. Banks are guilty of such inflation and of an increase of the refinancing rate, because they increased money supply in excess of the economy needs".