Kommersant: Belarus will see default, change of government … and president

Belarusian authorities have found a “relatively fair” way of depriving the population of money.

Right after the devaluation of the national currency in 2011 the National Bank dramatically raised the prime interest rate, and the Belarusians started bringing money to banks, and some sold apartments for a “guaranteed” revenue.

The events in Cyprus were the main news in Belarus for several days. The interest to Cyprus only appeared with local citizens because the country had been experiencing a “deposit fever” for one and a half years already: banks generously provided depositors with unprecedented interest rates and the zombie-population actively took out their foreign currency reserves, converted them into Belarusian roubles and put on national currency deposits. It is all very much similar to the financial pyramid MMM or simple gambling: everyone in Belarus knows that he/she must withdraw the money from of the accounts before the state devaluate the currency another time or freeze the possibility to withdraw deposits.

The deposit interest rates by the end of last year became the main topic for kitchen, office and street conversations; some even sold their apartments: the interest rate incomes were incommensurably higher than the rent ones.

According to government experts’ assessments in 2011 the Belarusians saved in cash around $12-14 billion. In February 2012 the National Bank reported that in the first month of the year the population sold $203.5 million more foreign currency than bought. And the monthly cash turnover dropped in the country compared to January 2011 by 8.4%. At the same time the amounts of deposits in roubles rose by 1 trillion 233 billion roubles ($142 million).

“The population has started actively taking cash to time deposits in roubles instead of stores and investing in foreign currency, - Aliaksandr Mukha from the research group BusinessForecast.by is surprised. – Moreover, the population even sells foreign currency”.

De-dollarization continues. In February 2013 the amount of deposits in roubles increased by 13.4% and by 1 March accounted for 27.9 trillion roubles ($3.26 billion). And natural persons’ foreign currency deposits have only grown by 0.1% up to $6.43 billion.

In 2012 the national currency deposits of the population and legal persons in Belarus’ banking system have grown by 58% and on 1 January 2013 accounted for 54.3 trillion roubles. At the same time the population’s deposits in roubles have increased by 75%.

The deposits of population in Priorbank (largest private bank in the country, part of the Raiffeisen AG group) in Belarusian roubles increased by 2.3 times in 2012 and by 26% in foreign currency. Now they account for 610 billion roubles and €62 million.

The head of the analytical center Strategy Leanid Zaika says that in the country it is possible today to earn up to 5% of a deposit’s amount monthly. “Even professors are now playing these games”, although, according to him, “not a single serious analyst will try to” predict the situation in the deposits market.

An employee of the Belarusian Economic Research and Education Center Dzmitry Kruk considers this a “roulette game”, which popped up because of “the imperfection of the monetary policy and at the background of the problem heritage of the 2011 foreign currency crisis”.

The Belarusians lost around $1 billion in 2011 due to the devaluation of rouble. If the situation repeats the losses will be many times higher.

The current situation in Belarus reminds the situation in Russia in 1998. Exactly the same combination of macroeconomic factor can be observed: budget deficiency, weak current account of the balance of payments, high inflation, fixed exchange rate, beyond-the-clouds interest rates.

Fifteen years ago in Russia this ended with a state debt default, banks bankruptcy, huge devaluation of the national currency, change of the government and later the president. Something similar, apparently, will happen in Belarus.