Zeros to Be Back Soon

What can a denominated Belarusian ruble bring soon?

2:1 - the last time we saw such ratio of ruble against dollar in 1991 year. 25 years later and after the total taking-away of eight zeros, today less than two national banknotes are given for the US currency. Such rate was set at the first after denomination session at the Currency and Stock Exchange. Belsat is trying to figure out what is waiting on the Belarusian ruble in future.

Ex-chairman of the National Bank Piotr Prakapovich at a recent "All-Belarusian Assembly" stated that after the denomination the Belarusian ruble would be the strongest currency among neighbouring countries. However, his optimistic forecasts used to be voiced before crises, like it happened in 2011.

Economic observer of Belarusians and Market Uladzimir Tarasau says that the current statement of Prakapovich also sounds on the background of alarming trends. First, the domestic currency is afloat because the people spend their dollar reserves caused by cut of wages.

Optimistic statements of officials are trying to save this fragile trend. The second factor which inflates the dollar rate is a tight monetary policy.

"If they do not print money, there is a chance to remain the position of the hardest currency among the neighbouring countries. As soon as old practice is launched, it will lose its positions," senior analyst of Alpari Vadzim Iasub predicts.

It remains doubtful whether the government prevents itself from the increase of money supply. Without printed subsidies finances of public enterprises are rapidly coming to their end. Within a year net losses of such enterprises doubled. From the beginning of the year enterprises could pay a little more than half of the electricity and the amount of bad loans nearly doubled.

"There are options starting from the soft landing to return to hyperinflation. The government's policy is the main regulator," Vadzim Iasub explains.

According to Uladzimir Tarasau, the government leaves only two possible scenarios by not accepting comprehensive market overhauls.

In case of further curbing of infusion of money the ruble devaluates gradually - 10-20% per year. It will cause a wave of bankruptcies and layoffs. If it causes social unrest, it will turn to issue of money. Then both dollar exchange rate and prices start to accumulate zeros again.