Authorities Begin To Repeat Prakapovich's Banking Policy
- 10.06.2024, 10:08
What will this lead to?
When a lot of extra banknotes appear in Belarus, sooner or later they end their journey on the currency market. The happy owners of Belarusian rubles happily rush to exchange them for a slightly more convertible currency, writes the website “Belarusians and the Market”.
In May, enterprises set a record for this year in the purchase of currency.
Stimulating domestic demand does not go in vain. Because not only domestic demand is stimulated, but also appetites for the purchase of imported goods.
The turnover of the currency market in May was a record since the beginning of the year and amounted to 9 billion dollars. At the same time, over the month, demand exceeded supply by 204 million. The deficit was provided by Belarusian banks and enterprises. Banks bought currencies for 115 million dollars more than they sold, and enterprises for 383 million.
The sale of currency by the population and non-residents slightly softened the situation, but could not completely correct it. Due to record purchases of currency, the balance on the currency market turned out to be negative for five months and amounted to almost 150 million dollars. Although for four months, the sale of currency exceeded the purchase.
The change from plus to minus seems to be the result of the new economic policy of the Belarusian authorities. Or rather, the policy is old. The hero of Belarus Pyotr Piatrovich Prakapovich was already noticed pursuing such an economic policy. Its essence is to flood the economy with cheap money and see what comes of it. But the Belarusian authorities have not done this on such a scale as has been happening in the last couple of months for a long time.
Recently, foreign markets have regularly disappointed our officials. Exports are not growing in the direction and not as we would like. And sometimes they do not grow at all, but quite the opposite. And GDP needs to be increased. There is no escape.
Therefore, officials have focused on stimulating domestic demand. Domestic demand has become the locomotive that pulls all economic growth along with it. Moreover, domestic demand is growing not due to investments and development of enterprises, but mostly due to the consumer market.
“Economic growth is supported by a high level of domestic demand, primarily consumer demand,” says the report by experts from the Eurasian Bank.
Over four months, retail turnover has grown by 11%. This is not surprising, given that the rate of wage growth in the country has long been outpacing the rate of economic growth.
The authorities are also flooding the economy with cheap loans. Moreover, banks are lending to both demand and production. In April, the volume of loans issued to companies increased by one and a half times.
“Accelerated growth in lending creates conditions for further growth in domestic demand and an increase in inflationary pressure,” says the report by the Eurasian Bank.
The authorities are flooding the economy with money so that factories produce more and buyers buy more Belarusian goods. But buyers have their own priorities in life. The Belarusian market is structured in such a way that when a lot of money appears on it, the appetite for not just purchases grows. The appetite for buying imported goods grows.
As a result, the rate of import growth is significantly outpacing the rate of growth of Belarusian exports. In April alone, the deficit of foreign trade in goods increased by 350 million. Over four months, it amounted to 1.27 billion.
There is more money, the demand for imports is growing. Accordingly, in order to meet this demand and import more goods into the country, Belarusian enterprises buy more currency. As a result, the surplus on the foreign exchange market is replaced by a deficit.
The problem is that there is nothing to compensate for this currency deficit. No one has trusted us with loans for a long time, and even the officials themselves do not like the quality of investments that come into the country.