Updated at 14:52,24-02-2021

Loans in Belarusian industry may create additional external and domestic risks


On August 3rd, the National Bank decided to reduce the discount rate from 20% to 18% as of August 17th, 2016. The decision was likely to had been lobbied by industries and aimed at stimulating the real sector. Thanks to this decision, the banking system is likely to reduce the proportion of problem loans. However, just before that the Eurasian Development Bank warned the Belarusian authorities against such measures: "Key interest rates should not reduce amid sustainable increase in the current account deficit, and persisting risks with financing a balance of payments.” Meanwhile, the current account deficit increased in January-May to 10.3% of GDP. Such an inconsistent relaxing of monetary policy may complicate the disbursement of the third tranche of the EFSD loan (USD 300 million). Domestic risks include additional pressure on the currency market, replenished stocks with illiquid commodities and deteriorated financial health of industrial enterprises.