OREANDA-NEWS. January 13, 2009. All the objectives stipulated in the Belarusian monetary policy in 2008 were successfully fulfilled, Chairman of the Board of the National Bank of the Republic of Belarus (NBRB) Piotr Prokopovich reported to President of Belarus Alexander Lukashenko on January 12. The Belarusian President and the National Bank Chairman discussed the work of the banking system in 2008 and the challenges it will face in 2009.

Although the Belarusian economy was affected by the global economic crisis in 2008, the GDP grew 10%, the investment 23.1% in 2008. It helped raise the real salary of the population by 12.3%. It means that the main economic objectives set for 2008 were fulfilled to the full extent.

The banking system played a significant role here, too. The bank lending rose more than 1.5 times in 2008, the great bulk of it being investment and consumer loans. The volume of consumer loans increased more than 1.6 times over the year. The payment system was stable (in 2008, the volume of payments grew 1.5 times).

In 2008 the legal capital of Belarusian banks doubled to exceed Br4 trillion. The inflow of foreign investments into the banking system has soared, with bank resources 42% up on 2007.

In late 2008 three banks with a share of foreign capital were set up in Belarus. The fact testifies to the trust foreign investors place in the Belarusian banking system.

Last year’s economic success was also attributed to external borrowing and the use of the gold and foreign exchange reserves. 2008 saw the gold and foreign exchange reserves decrease by USD 1.33 billion. The money was used to ensure effective operation of the real economy sector and the achievement of the planned economic growth. This year Belarus should work hard to attract external resources for the sake of supporting the real economy sector and ending the global economic crisis with the least losses.

Piotr Prokopovich reminded that Belarus had actively negotiated a loan with the International Monetary Fund. In late 2008, the IMF preliminarily agreed to grant our country a USD 2.5 billion loan. A necessity to devaluate the Belarusian ruble emerged during the negotiations. The sides disagreed upon the way the devaluation should be carried out: should it be a one-off or a gradual devaluation. “Till the end of the last year we defended the point of view that the devaluation of the Belarusian ruble should be gradual, but later the National Bank decided to hold a one-off devaluation,” Piotr Prokopovich said. In the conditions of the global financial and economic crises the country should be sensitive to any changes.

Therefore Belarus realized that during the crisis it should undertake the most efficient measures to encourage the economic growth, export and production. A one-off devaluation is the most effective from this viewpoint. A gradual devaluation is less efficient. As for some negative repercussions of a one-off devaluation, like higher prices for imported goods, that would happen anyway sooner or later.

The National Bank and the IMF did not have any disagreements about the size of the devaluation (20%).

“A one-off devaluation was carried out earlier this year. It signaled that there will not be another devaluation of the national currency. We have fulfilled our duty to the full extent and there is no more need for a one-off devaluation,” he said. Beginning January 2, the national currency will be bound to other foreign currencies in the basket. The value of the currency basket will remain virtually unchanged. In 2009, it can vary by 5% depending on the demand and supply of the foreign currency on the home market and other factors.

According to Piotr Prokopovich, early this year the situation was exploited by the people who would like to destabilise it. The NBRB head said major efforts had been put into spreading the gossip about a denomination allegedly in the works, about further one-time devaluation of the national currency against the US dollar, restrictions on bank deposit withdrawals, and Belarus’ switchover to using the Russian ruble within a week. Unfortunately, some Belarusians have been affected by the gossip but it is completely groundless.

In order to carry out a denomination, a president decree has to be issued 3-4 months in advance, that is at least three months of preparations are needed. “This is why talks about a denomination in a couple of days are childish. Last time we started denomination on January 1, 2000 while the decree was signed back in September 1999. Everyone was calm and waited, knowing when and how the denomination will take place,” said Piotr Prokopovich.

In his words, the transition to the Russian ruble would take at least 2-3 years. For instance, in order to start using the Russian ruble the central banks alone have to work out six agreements, some interstate agreements have to be adopted, some of them have to be ratified by the two parliaments. The procedure can take several years at best.

As far as restrictions on deposits of individuals are concerned, the National Bank has never planned and does not plan such things.

Experts believe at present the Belarusians possess from USD 2 billion to USD 20 billion in various currencies on their hands. “Why do people keep the money at home these days? It is a major loss of incomes for individuals. For instance, last year banks paid USD 1 billion in interest rates for deposits to individuals. While doubts about the stability of the banking system could exist before, nowadays they shouldn’t. Our banking system is strong and steady,” said Piotr Prokopovich. He reminded, the government has guaranteed the recovery of 100% of bank deposits in all currencies. Apart from that, the money should work for the benefit of the national economy.

Import substituting measures were touched upon at the meeting, too. According to Piotr Prokopovich, if Belarus had reduced the import by 10% in 2008, it would have saved it more than USD 4 billion, there would have been no need for external borrowing. It is possible to reduce the import by 10% by supporting domestic manufacturers.

The Head of State demanded that the necessary measures should be undertaken to fulfill all the objectives of the monetary policy of the country in 2009.