29 March 2024, Friday, 3:17
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Ruble Savings Of Belarusians Will Be The First To Fade Away

Ruble Savings Of Belarusians Will Be The First To Fade Away

The situation may end up with the default.

On August 8 the Department of State announced news sanctions against Russia for the use of chemical weapons (Novichok agent - editor's note) on the territory of Great Britain. The very announcement of sanctions, which primarily affect the banking system, has caused the record drop of the Russian ruble over two years and has made the Russia's stock market collapse.

How can US sanctions against Russia influence the economy of Belarus? Barys Zhaliba, Doctor of Economic Sciences, answers the question of Charter97.org:

- These sanctions will both affect the economy of Russia and Belarus.

It is already seen at the sanctions definition phase. We observe a strong influence of a psychological factor: sanctions are still being developed in the USA, but financial indicators are already collapsing in Russia. Securities quotation decline, the Russian ruble exchange rate against dollar has hit all-time low over past two years. And it will take several months before the toughest variant of sanctions is imposed.

I think that the Russian ruble and securities will recover a bit unless an official entry into force of the sanction law. Even if dollar costs less than 66 rubles, it will not be possible for the Russian ruble to recover in full. It will be weaker than before sanctions. The same will happen to Russian securities, I guess.

As they say, things are underway. The financial system of the Belarusian "ally" will be weakening.

We can observe the scale of fear before American sanctions. Non-residents sell sovereign Russian bonds, investors and the capital leaves Russia.

Americans have already announced leading banks of Russia - Sberbank, ВТБ, Vnesheconombank, Otkritie Holding - subject to American restrictions.

But the gravest troubles are to wait for the Russian and Belarusian economy.

- What do you mean?

- Iran's experience showed that banks and companies which ignored sanctions had falled under those sanctions themselves. That's why many of them will be careful about having business with Russian banks and companies not to bear losses. The Russian economy will be isolated along with the dependent Belarusian economy.

- The Russian economy was shaken in the first day of announcement of sanctions. What will happen to the Belarusian economy in the near future?

- It's already bad for Belarus to know that the Russian ruble is depreciating. As events of late 2014 show, our export is the first to suffer. In general, we are paid in Russian rubles, according to agreements signed.

And now when Belarusian exporters start converting the export revenue into euros and dollars, it will bear losses of hundreds of millions. Exacerbation of crisis of 2014 may reoccur. Moreover, it is already reoccurring. We can observe signs of the new financial crisis, which can put an end to the current monetary policy of the National Bank.

Finally, the National Bank will face the dilemma: either to pursue the crawling peg or to allow the ruble depreciation. In the end it will cause a significant depreciation of Belarusian currency.

- What are consequences for ordinary Belarusians?

- The real purchasing power will decline. After all, all Belarusians receive salaries in Belarusian rubles. But these are long-running consequences.

People with ruble deposits will be the first to suffer. Their true value will start fading away.

Then the Belarusian ruble will start leaking from the economy. The Belarusian currency will start loosing its significance. The National Bank will have to accept the defeat in the "de-dollarization" policy, which it is trying to follow now.

Then there will be a great tension in the budget and gold and currency reserves. After all, Belarus has a huge external debt subject to repayment in currency. The domestic debt of the Belarusian government is also of 80% currency one. Currency for repayment of the external debt will be harder to buy; it will result in cuts of the expenditure budget, that is, citizens.

If the toughest scenario happens, it means no ability of Russia to support the Belarusian economy. As they say, Bolivar cannot carry double. Then even default may happen.

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