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Barys Zhaliba: We should prepare for worst

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Barys Zhaliba: We should prepare for worst

The Russian ruble will continue falling that will speed up the devaluation in Belarus.

Many Belarusians ask logical questions amid the latest events in the neighbouring country. What will happen to the Belarusian ruble and when should we expect the new decline that seems to be inevitable? Charter97.org talked to economic Barys Zhaliba, who explained what currency people should choose for their savings, if it's worth taking loans and if a sharp devaluation of the Belarusian ruble is expected.

– Many ask how to behave and if they should to get rid of Russian rubles urgently. In your opinion, what would be better – to buy goods in Russia or exchange Russian rubles? Or maybe just wait?

– A friend of mine recently called me. She received a big sum of money in Russian rubles as a gift. She asked what she should do. Is it worth waiting until the Russian ruble reaches the bottom and then begins to grow? My advise was to exchange her money into dollars or euros as soon as possible. Those saving money in Russian rubles are in the worst situation, because the ruble is dropping fast against all currencies. I'd advice to convert Russian rubles into dollars, euros or Belarusian rubles.

The Belarusian ruble is declining and will continue to decline, so I would prefer to keep money in world currencies. It reduces the risk of devaluation and inflation. Other Belarusians take advantage of the situation. Those who have free time and money in foreign currencies go to Russia to buy expensive goods from home appliances to cars. The world and our currencies can be exchanged into a larger amount of Russian rubles due to the devaluation, but prices in Russia haven't grown enough to cover the ruble devaluation. The devaluation is already 100% against the dollar and 70% against the euro, while the inflation rate in Russia is about 10-15%. Inflation reacts to the devaluation with a delay.

Many Belarusians buy everything in Moscow and Smolensk and get profit. It is profitable and effective. Russia is a big place for shopping now.

– Is it worth taking loans and mortgages now? Is it possible to gain profit from the current situation?

– Individuals cannot choose many currencies. Banks haven't been issuing loans in foreign currencies for several years. People take consumer loans and mortgages in Belarusian rubles. On the one hand, you can take loans in Belarusian rubles, because the inflation rate will grow faster following the devaluation of the Belarusian ruble caused by the Russian ruble devaluation. It creates easier conditions for borrowers to pay their loans, especially if the agreement does not allow the bank to apply a floating interest rate.

As for long-term loans, it's better to wait until this turbulent period ends. No one knows what will happen to the Belarusian ruble amid the Russian ruble's plunge.

Our economies are interrelated. Our exporters suffer huge losses. The National Bank and the government think what should be done. Many propose to devalue our currency too, but in this case panic will spread among Belarusians, people will begin to withdraw money from deposits. But we should take into account that individuals are the main supplier of rubles. Many say we need to preserve the financial stability and not to try to catch up the Russian ruble, but in this case Belarusian exporters will suffer more losses, which creates problems with the gold and foreign currency reserves. We won't be able to keep the financial stability in the form of a gradual devaluation. It cuts both ways. The authorities and the National Bank must solve this puzzle now. Time will show which of the options they will choose.

– What do you think about a sharp devaluation of the Belarusian ruble? When should we expect it? It seems inevitable.

– It's hard to predict. The main factors that have led to the Russian ruble fall still exist. The effect of western sanctions grows, including the technological blockade of Russia; oil prices drop (oil costs less than $60 a barrel). The main thing that Russian banks are banned from taking mid-term and long-term loans in the international market. They have big debts that must be paid by the end of the year. I don't see any positive prospects so far. We should prepare for the worst for the nearest six months. A political factor also plays its role: Nothing will change unless Putin defuses the situation in Donbas, I don't even mention Crimea. But he digs in his heels.

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