National Bank Restricts Use of Dollar in Belarus

The Civil and Banking Codes will be amended.

This year the authorities intend to crack down on dollarization, Deputy Chairman of the National Bank Siarhei Kalechyts says, tut.by informs.

The restriction on the use of foreign currency in payments, as well as the binding of various tariffs to it, is one of the plans for the de-dollarization of the economy.

It is intended to amend the Civil and Banking Codes, as well as some decrees of Lukashenka.

In 2019 the National Bank will continue to take measures to reduce the level of dollarization of the economy with tools at its disposal, Siarhei Kalechyts said in his report on results of 2018 and on objectives for 2019. "By the end of 2019 and in subsequent years, the share of loans in the national currency in the aggregate loan structure should be steadily higher than 50%," Deputy Chairman of the National Bank added.

However, actions of the National Bank will be aimed at the formation of a new legal framework, providing for lifting of restrictions on foreign exchange transactions related to the movement of capital for individuals, as well as lifting of restrictions on opening accounts by legal entities in foreign banks.

It also provides for lifting of restrictions on the repatriation period of hard currency earnings and establishment of terms for their return in foreign trade agreements. It is also planned to create a currency monitoring system.

Siarhei Kalechyts reminds that since March 1, 2019 the de-dollarization of the economy provides for restrictions on settlements in hard currency between residents on corporate bonds denominated in hard currency and on certain types of insurance contracts. It also excludes the possibility of issuing individual permits of the National Bank for settlements in hard currency.

Speaking about possible amendments to the Civil Code, now it allows for binding monetary liabilities to hard currency (Article 298). In particular, it concerns co-investment and lease agreements.

Earlier, Chairman of the National Bank Pavel Kallaur called the retention of currency pegs in contracts a relic of the past.

Earlier, the National Bank noted that the total estimated amount of Belarus' losses from dollarization equaled to about 2-3% of GDP annually. In 2017 GDP of Belarus amounted to $54.4 billion. 2-3% is $1-1.5 billion.

Belarus' losses from dollarization are mainly related to exchange rate and inflation risks. Taking into account significant debts on currency credits (loans), Belarusian enterprises and the budget may incur significant financial losses. With 1% depreciation of the Belarusian ruble against the dollar, losses of enterprises from the revaluation of currency debts to Belarusian banks will amount to Br230 million, while budget losses - Br330 million.