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30 Nov 2012

NBB keeps the refinancing rate stable

Belarus finance system

The refinance rate has not been changed in November, and the devaluation of the Belarusian ruble by the National Bank is not planned at the moment.

“Today we have such a situation that there is no possibility to reduce the re-finance rate. This situation does not allow such a step, so we neither reduce the rate, nor increase it,” reported at the press conference on November 21 Nadezhda Ermakova, the Chairwoman of The National Bank of Belarus

She also mentioned that “inflation is within the framework provided by The Main directions of Economy Development in 2012, the refinance rate change today will not affect interest change on deposits and loans markets.There is no point in changing it now”.

However it does not seem to be the main reason. The refinance rate increase would have affected most deposits and loans interests on which are tied to it. In particular, this concerns bank loans, which are provided through government programs. Besides, the amount of funds needed by the Government to compensate part of the interest on loans under government programs would increase significantly.

Such additional expenses were not provided for by the Government and the National Bank, because by the end of 2012 they expected to reduce the refinance rate almost to 20%. That’s why the refinance rate increase would have forced reduction of lending under government programs or the National Bank would have had to carry out additional credit issue, yielding to the President’s request to ensure GDP planned growth.

But the National Bank does not want to do it, and apparently, that’s why it is not increasing the refinance rate, waiting for the moment when it will be possible to reduce it. According to Nadezhda Ermakova, how long the rate is fixed depends on the situation developing in the economy.

While supporting the GDP these tactics fraught with unpleasant consequences for the financial market. One may recall that during the 2011 crisis the National Bank hesitated to increase the refinance rate for a long time, which only aggravated the situation.

At the same time, Nadezhda Ermakova said that there will not be an emission to increase GDP growth in Belarus. But on the other hand, she stressed that the lending of state programs is not suspended.

"Belinvestbank has fully regained its liquidity, it even has a surplus, and it is trading in the interbank market. In Belagroprombank situation with liquidity is still serious, but in any case, the liquidity lack is decreasing. The Bank takes measures to return earlier loans, generate resources and it is gradually restoring its liquidity, " said Nadezhda Ermakova. So Belagroprombank is also working in the market, it does not stop lending its customers, but new lending has slowed down.

In general, as noted by Nadezhda Ermakova, none of the Belarusian banks has suspended lending. "The economy is being financed. We do not have such problems when someone did not provide somebody with a loan because there are no resources. But requirements for lending have tightened. It means that loan must be secured. The return of the loan must be noticeable, all principles of lending and efficiency of loans issued must be respected. This tightening from the banks does exist" – the head of the National Bank explained the situation.

According to Nadezhda Ermakova, the situation with private deposits is also improving. There is even a small inflow of deposits in Belarusian rubles which, according to N. Ermakova, was caused by deposit rates increasing. Currency deposits, she said, are also growing, even a little more rapidly than deposits in Belarusian rubles, but not as much as in the third quarter.

As for depreciation, Nadezhda Ermakova believes, that "it is not perceptible or considered in Belarus”.



By "The Belarusians and market" weekly (belmarket.by)
Translated by Maria Gurko

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