Stanislau Bahdankevich: National Bank fears slump

The National Bank decreased the refinancing rate to 23.5% and gives loans at 40% interest rate.

Stanislau Bahdankevich, a former chief of the National Bank of Belarus, spoke to charter97.org about a significant increase in ruble deposit interest rates.

“I think the steps taken by banks to stop converting rubles deposits into dollar ones are not the only reason. The actual reason is the problem of liquidity, because industry doesn't have its own capital. The circulating capital remains frozen in unsold products and accounts receivable. Banks don't have enough money for operations, so they have to increase deposit rates to get resources to cover the current debts,” the economist said.

Stanislau Bahdankevich thinks some people will find the growth of deposit rates attractive.

“There's a risk of devaluation. But on the other hand there's a chance to earn on the stable exchange rate. You get profit from the increased deposit rates and convert money into dollars and euros on the stable exchange rate. As for the refinancing rate, I'd like to repeat that it is set by the state. Commercial banks don't stick to the rates established by the National Bank – they are guided by their own interests. If they don't have money, they increase deposit rates. It's better to ignore the directive of the National Bank than to go bankrupt. Banks are always looking for resources when they don't have enough. They can take loans in the free credit market from other banks or the National Bank, but these loans are expensive. The National Bank decreased the refinancing rate to 23.5% and gives loans at 40% interest rate. The National Banks cheats, but it fears the slump and wants stability,” the expert summed up.

It should be reminded that most Belarusian banks have announced a significant increase in ruble deposit rates.