Currency Regulation
The dynamics of the Belarusian ruble exchange rate played an essential role in restraining inflation rates. An official exchange rate of the Belarusian ruble to the Russian ruble was used as a benchmark.
The real exchange rate of the Belarusian ruble to Russian ruble and real effective exchange rate remained within the limits not adversely effecting the price competitiveness of the economy.
Increased confidence in the national currency based on its positive dynamics with respect to the foreign currencies among other things contributed to the continued increase in the economy’s demand for Belarusian rubles, reduction in the monetary sphere dollarization and also promoted the economic growth.
An active interest policy aimed at providing positive interest rates in real terms to promote savings in Belarusian rubles and expand access to the bank credits for the real economy sector played a critical role to stabilize the Belarusian ruble and solve a number of macroeconomic and finance stabilization problems in 2005.
The emerging economic situation, first of all, deceleration of inflation processes and the interest policy-related actions taken in this context contributed to the reduction in the entire range of interest rates in the financial market and also in cost of credit resources. The refinancing rate was reduced from 17% per annum as of the beginning of 2005 to 11% per annum as of the end of 2005.
The national banking system continued to develop dynamically. In 2005, the banks’ resource base increased by 40.8% and was estimated to be BYR 20.5 trillion, or USD 9.5 billion as of 01.01.2006. In general, the banks’ resource base increased 8.1-fold in 2001-2005.
Better accessibility to the banks’ credit resources promoted credit supply by 53.7% in 2005, inclusive of long-term credits – by 68.5%. Over the last five years, the banks have been increasingly involved in the financial support of the economic growth.
As of 1 January 2006, 31 banks with 450 branches operated in the country, of this number, 27 are banks with foreign capital participation, inclusive of 8 with 100 percent foreign capital. Seven banks are free economic zones’ residents. In addition, 13 foreign bank representative offices from Russia, Lithuania, Latvia, Germany, Poland and Kazakhstan are available in Belarus. The foreign capital share in the aggregate authorized capital of the banks was estimated to be over 9%.
The monetary policy pursued comprehensively contributed to addressing key targets of the country’s socioeconomic development and stimulated the economic growth and investments and promoted well-being of the population.
In 2006, the National Bank of Belarus will continue following the monetary policy based on clear definition of the ultimate goal and intermediate targets of the monetary policy and its transparency.
The ultimate goal of the 2006 monetary policy is to reduce inflation, measured by the increase in the consumer price index, down to 7-9% by using monetary tools supplemented by actions of the general economic policy pursued by the Government. Stability of the Belarusian ruble exchange rate will be the focus of attention.
As before, pursuance of the interest policy is to be aimed at supporting positive real interest rates of the bank operations to attract term deposits and grant credits in Belarusian rubles.
The refinancing rate is forecast to be 8-10% by the end of 2006. In 2006, the tendency of reducing the norms of deductions to the obligatory reserve fund is likely to remain.
Reaching the inflation targets supplemented by the national currency exchange rate stability is to be the major contribution of the monetary policy to meet the targets of social and economic development in 2006 and create prerequisites for a sustainable economic growth.
The monetary policy in 2006-2010 sets a strategic goal of efficiently operating the monetary system which would contribute to a sustainable economic growth, increased real cash incomes of the population, investments and savings.
The Belarusian ruble is also to be stabilized including its purchasing power and exchange rate in relation to foreign currencies as one of the measures to support the economic stability and reduce inflation. The rates of increasing the money supply in the national currency are to be maintained subject to the demand of the economy for money and inflation targets the allowable level of which is planned to be not more than 5% in 2010.
A long-term strategy aimed at strengthening the Belarusian ruble exchange rate would promote higher purchasing power of the national currency, stimulate turning foreign exchange savings of the population and economy entities into ruble deposits to be put into the commercial production.
