Economist: People Do Not Eat Dollars but Sausage, Milk, and Bread

Store prices are the best indicator of the state of the economy.

Vadzim Iasub, a senior analyst at Alpari Eurasia, assessed the situation on the foreign exchange market in Belarus.

- A titanic effort to hold the exchange rate was required last year in March and August when huge amounts of foreign exchange reserves were really thrown in to hold it, - the economist says to Salidarnasts. - Now such titanic efforts are not required. In the first two months of the year, the population bought foreign currency but bought about $ 200 million on a net basis. This is a fairly moderate pressure on the course. Therefore, I would not say that now someone is artificially holding back the dollar. Now, in principle, the situation on the foreign exchange market is more or less balanced,

Vadzim Iasub explained why the population does not stop talking about devaluation.

- A crisis in the economy does not necessarily mean devaluation. It's just that the Belarusians are used to associating any "bad in the economy" with devaluation. But this is not directly related, there may be a crisis in the economy, and the exchange rate may be stagnant, the national currency may even strengthen, which is happening now.

In order for the dollar to jump, it is necessary that they begin to buy it in large volumes, no matter who - enterprises or the population. To do this, they must have a lot of free rubles, which there is no longer anything to spend except to buy a dollar. And now neither enterprises nor the population has extra rubles.

But people do not eat dollars but sausage, milk, and bread. Rising prices and declining incomes can not please anyone. In fact, even if the exchange rate stands still and prices rise, life becomes worse.

But one must understand that it is not the devaluation that is growing due to the rise in prices but the opposite. Last year, the dollar grew by about 25%, and prices are winning back last year's devaluation now. In addition, they are under pressure from the abolition of VAT benefits, the expert says.

He notes that the issue of emission has been acute for the country's leadership over the past year.

- And now the debate continues: will they turn on the printing press or not. The average person thinks that since new banknotes have appeared in ATMs, it means that the issue has begun. But when economists talk about "printing money," they mean something completely different. The new bills have nothing to do with the issue of money at all. Cash takes up a very small place in the total money supply and is indeed constantly updated.

And the issue of money is when the National Bank "draws" non-cash rubles and credits them to the accounts of commercial banks. Therefore, devaluation will occur only when they begin to draw money out of thin air in large volumes to transfer to unprofitable enterprises, the financial analyst emphasized.

However, he does not undertake to predict the timing of a possible devaluation.

- It all depends on the actions of the government. In theory, the urgent need for money from chronically unprofitable enterprises, which only rely on the fact that money will be printed and presented to them, can make them print billions.

And I believe that serious discussions are going on about this at the level of the National Bank, the Council of Ministers, and the Lukashenka’s administration.

The argument of some is that if you help one, two, or three factories with the help of printed money, then inflation and devaluation will be guaranteed, and the entire population will feel it.

There are other people out there who probably haven't read economics textbooks. They argue that "printing money" is not dangerous at all but necessary.

But since the final decision is made by the only person in the country, it is impossible to predict which of them will be more convincing.

If those opposed to the printing of money win the conditional victory, businesses will suffer. If the latter seem more convincing, there will be devaluation, and this will affect each of us.

The choice is not very good - between bad and worse, - Vadzim Iasub sums up.