Considering the question of what the devaluation of the Belarusian ruble is, we begin with the fact that the monetary unit of Belarus in the last few months has shown a sharp strengthening in the basket of currencies. In parallel with the phenomenon, there was a significant depreciation of the currency in relation to the dollar and the euro. According to experts, the prerequisite for such a situation in the country was the economy of the state itself and the world as a whole. Between January and November 2014, the Belarusian ruble strengthened by an average of 2.25% against the backdrop of the euro, dollar and Russian ruble. The reason for this is the fall of the Russian ruble and the entry of the euro into the international market. If last year the question as to whether the devaluation of the ruble will be asked by many asked today, the answer to it is quite obvious. Will, and not one.
Where do the fears come from?
According to information provided by the National Bank of the Republic, since the beginning of 2015, the depreciation of the national currency against the US dollar amounted to 1.92%, and against the euro - 2.46%. And all would be fine, but the country's population is accustomed to measuring their level of income in US currency. As mentioned above, there was a strengthening of the monetary unit against the Russian ruble by about 18%. This fact does not change devaluation sentiment. Since 2000, it has been customary to make forecasts and store savings in dollars. A similar trend is pushing for the fact that the devaluation of the Belarusian ruble in 2015 will still make itself felt. According to analysts, it is the National Bank that regulates the exchange rate in the country, it is he who systematically reduces the value of the ruble.
What will lead to devaluation?
Considering the question of what the devaluation of the Belarusian ruble is, one can not but pay attention to the causes of the phenomenon. The situation is due to the fact that as a result of the decline in the global economy, the country stopped buying foreign currency in the volume in which it had previously purchased. Consequently, the influx of dollars does not block the outflow of currency from the state. Demand exceeds supply. The difference is overlapped by borrowing. This causes a smooth fall in the national currency. The absence of factors that could radically change the situation, only indicates a continuation of the trend. The lack of hard currency in the country indicates a significant revaluation of the Belarusian currency against the US dollar, which in July 2014 was at the level of 20-30%. With a high level of inflation, state goods are actively growing in price on international markets, imported goods are becoming more attractive to citizens of the country. The increase in imbalance leads to the need for the state to begin devaluation of the ruble to eliminate disharmony in the currency market.
A tight peg to the dollar is one of the reasons for the phenomenon
Due to the tight binding of the Belarusian ruble to the dollar, as noted above, there is a strong imbalance in foreign markets. While the national currency is cheaper against the dollar, it is gaining strength in comparison with other currencies in the world. The government decided to send the exchange rate into free float, as it is no longer possible to maintain stability in this sector. Even before the crisis, the Central Bank's policy was aimed at reducing the value of the currency within 1% per month. Eliminating a fixed rate should help solve export problems. The increase in external debt, the destabilization of the banking system - these are just temporary phenomena that in the future will be a thing of the past.
What is the root of the problem?
In order to understand the question of what the devaluation of the Belarusian ruble is, you must first make an assessment of the economic situation. Preliminary data indicate that by the end of 2015, the devaluation of the national currency will reach 40-50%. One of the main reasons is the increase in crisis phenomena in the nearest neighbor, in Russia, in geometric progression. The country is more than 60-70% dependent on Russia, therefore, building partnerships will be more difficult each time. The current crisis differs from the problems of the past in that it is formed by several factors. These are not only internal reasons, but also external ones, such as EU sanctions and a drop in oil prices. The credit rating of Russia is the last investment place and the pre-speculative level. The capital market for Belarus’s neighbor is closed, the value of money is growing, neighbors are not becoming more generous. At the same time, the cost of money is increasing for the Belarusian business. Today, the refinancing rate in Russia is 8.25%, and in Belarus - 25%. These indicators will increase until the price of oil falls and while sanctions are active. The circumstances described above will directly affect each citizen of the country through the ruble exchange rate of Belarus. Significant adjustments to the development of events can be made by the upcoming elections in the country.
What do the forecasts for 2015 say?
The question as to whether the ruble will be devalued or not has already disappeared, but its volume can be called into question. The indicator at the level of 40–50% is not very pleasing to anyone. Problems can arise in such sectors of the economy as retail and the financial sector, real estate, and other areas focused on the final consumer. President Lukashenko at a press conference spoke about the relevance of the ruble’s liberation due to the currency panic of the population. The government’s plans have never been the devaluation of the ruble, and the mortgage should always have remained within the framework of the affordable. This decision is due to the fact that the government intends to maintain its gold reserves. The open policy of Belarus could not but feel the crisis in Ukraine and Russia. Despite the panic, the course is still being monitored. Change of economic model is not planned. Moreover, it was announced to the public that the causes of the devaluation of the ruble in 2015 are multilateral, fortunately, over time, the situation will change dramatically.
Devaluation expectations
Devaluation expectations in society affect inflation due to demand for currency and goods. The growing demand of the population in dollars, euros and even in rubles is suppressed by additional devaluation. This speeds up inflation. At the end of 2014, in order to bring down demand for foreign currency, the government introduced a commission for the purchase of foreign money in the amount of 30%. After the fall of the excitement, the interest began to be canceled in increments of 10%, which was simultaneously accompanied by a fall in the value of the national currency by at least 7% each time. It was a step of the state towards businessmen. The interest on currency exchange was offset by a drop in the value of money.
What will happen next
If the situation in the country develops in this format further, in the near future the question of what the devaluation of the Belarusian ruble is will be replaced by the expectation of inflation growth. This will cause a rise in deposit rates, which will increase the desire of the country's population for savings. There is practically no doubt that the devaluation of the ruble 2015 will continue for more than a month. What should the population do in this situation? Do not panic. This will be the most rational solution in the circumstances. Soft monetary policy can lead to the generation of one inflation by another, thus forming an inflationary spiral. If the phenomenon takes place, the government will first of all have to pay attention not to business and private households, but to the poor.
Devaluation at the end of 2014
The question of what the ruble devaluation means did not greatly concern the public at the end of 2014. This is due to the fact that the phenomenon could not have been avoided. The reason for this was the problems faced by Russian exports. Subjective and psychological factors provoked panic. In just one day, namely December 18, Belarusians bought foreign currency in the amount of $ 80 million, which is several times more than the average amount. Back in the autumn of that year, the volume of currency purchases did not exceed $ 5 million. The authorities almost immediately took drastic measures and decided to let go of the course in free swimming. Compared to 2011, when the country's leadership did practically nothing, the reaction was prompt.
What led to the depreciation of currency in the market?
Consider what the devaluation of the ruble-2015 led to. Everyone will decide what to do, but the consequences of the phenomenon can be assessed. A significant benefit as a result of the situation went to exporters. At the same time, one should not expect a big push, because Russia is the main consumer of Belarusian goods (more than 43% of exports), and it is currently in decline. Economic growth is blocked by bank interest rates, which have become completely unbearable for business entities. Many, considering the question of what the devaluation of the ruble means, talk about the fall in their earnings in dollar terms. Due to the binding of the national currency simultaneously to the dollar, euro and ruble, significant instability is observed. Ruble devaluation and mortgages on acceptable terms are almost incompatible concepts. Today, the national currency has become an indicator of the state economy, a symbol of its unstable state.
What does the situation in the country mean and is everything so bad?
Economic growth in Belarus increased 1.6 times in 2014. In 2015, GDP is expected to grow by 0.2–0.5%. Wage growth is expected in connection with the upcoming presidential election. Devaluation is also associated with a reduction in financial assistance from Russia. Statistics say that during the first devaluation, citizens of the country purchased about 48 thousand cars in Russia, despite the fact that offers to buy vehicles are more profitable in the country. The expense of funds amounted to about 500 million. To maintain the national currency, the government spent 760 million, which led to a reduction in gold reserves to 5 billion. Demand for foreign currency pushed up interest rates and further freezing credit. The cost of food, pharmaceuticals and tariffs of state enterprises was frozen. OTC currency transactions were taboo until 2017. Having considered the question of what threatens the devaluation of the ruble to the population, it is worth mentioning the change in interest rates on loans and deposits. They were completely tied to the national currency.
What does the future prepare for us and what obligations did the country assume in connection with the fall in the price of the ruble?
In 2015, the state must fully repay external debt, the amount of which is about 3 billion. The allocation of funds from the budget for settlement with partners should not affect the reduction in demand. Assistance from Russia in material terms, although it will open up import flows, will not completely solve the situation. The problem in the banking sector will remain unresolved during the year. This is due to the fact that foreign assets are located in the negative zone. Only rates in the amount of 50% or more can get rid of losses on withdrawn deposits. Having studied the question of what the devaluation of the ruble means for Belarus, we can say that this process is more than usual for the country. Since 2000, the national currency rate has sagged by about 10% in just a week at least 5 times. The course is under pressure from increased demand for imports, the growth of salaries significantly exceeds production at a fixed rate. The economy is constantly fueled by soft loans and subsidized construction. Devaluation has never been used to eliminate problems, as it has always been followed by decrees to raise wages. Thanks to Russia's support, the country's economy has never plunged into a deep hole.