Belarusians has bought less hard currency in January that in December
In January, the population bought 4 times less currency, than in December of 2014. Moreover, the companies reduced the volume of foreign currency purchases by 36.9%.
However, it did not happen because individuals suddenly lost interest in the currency, but mainly because of Belarusian commercial banks in January of this year, mainly sold to individuals only the currency, which they passed.
That happened not because Belarusians lost interest to the foreign currencies, but mostly because of commercial bank’s problems. They sold only the currency, they bought from the people earlier.
Few people wanted to sell. According to the National Bank, in January, individuals sold to banks only 328.2 million USD comparing with 564.7 million USD in December 2014. It turned out to be approximately 2 times less than in January 2014, when the population had even sold 710.8 million USD.
Despite the high interest rates on ruble deposits, people did not seek to sell the currency, and put the money on ruble deposits, as it happened after the previous devaluations of ruble. The reason for this is the new policy of the National Bank, which announced the peg of the ruble to the basket of currencies including the euro, the dollar and the Russian ruble. But still, National Bank haven’t set any boundaries in possible fluctuations.
At the meeting of National Bank’s direction, the mechanism of formation of exchange rate was discovered. If there is and excess of demand over supple at the currency market, the rate will rise. National Bank tries to minimize interventions and form the currency rate with the help of demand and supply, but it still limits the daily volatility.
This means that USD/BYR exchange rate can decline by an unspecified amount. The people in Belarus are financially literate; they understand that it makes no sense to hope that the ruble will be stable. Therefore, there is no rush to sell the currency.
No lines in banks
However, the demand for currency has also decreased recently. We can see the lack of excitement in bank’s exchange offices.
This fact has its own explanation too. The population of Belarus due to relatively high financial literacy understands that is not profitable to buy foreign currency right now, as in the stores still have enough goods for “old prices”. That’s why it is better to buy goods, and people do this. Such attitudes may persist for a long time, especially if prices will rise slowly. Therefore, a low inflation rate will calm down the foreign exchange market in Belarus. However, this could lead to shortages of goods over time.
In January 2015, individuals bought only 365.4 million USD comparing with 892.8 million USD in December 2014. Year ago, they bought 611.9 million USD of foreign currency.
As a result, the population managed to buy foreign currency 37.3 mln USD in cash. It is more than was sold to the banks. That means that some banks were selling foreign currency from their own funds.
Restrictions existed at non-cash market too, so the volume of non-cash purchases by individuals was 25 times less, than in December. At the same time, individuals sold 32 million USD of non-cash currency, what means that the demand exceeded supple there.
In sum, individuals bought 30.2 million dollars more than sold.
Companies are waiting.
The uncertainty in the currency market makes Belarusian economic entities hold the money. Therefore, the volume of currency sales in the domestic market fell to the lowest level since 2011 crisis.
According to the National Bank of Belarus, Belarus located companies sold on the domestic market 1.45 billion USD, which was 248.2 million USD less than in December 2014. This is much lower than in January 2014, when the companies sold 1.6 billion USD. However, the demand for foreign currency fell by 631 million USD compared to December – down to 1.522 billion USD. A year ago, in January, they bought 1.756 billion USD.
Many businesses simply did not venture to begin active operations, not knowing what was happening in the market. However, it is possible that some business entities bought currency in December.
Nevertheless, the Belarusian enterprises bought 66.9 million USD more currency than sold. It is about the same as in January 2014, when the surplus was 89.1 million USD.
Foreign businesses in Belarus also behaved carefully. Their demand for the foreign currency was miserable: 3.7 million USD. They sold 22 million USD. Thus, non-residents were net sellers of the currency for 18.3 million USD.
In general, economic entities and the population of Belarus bought 78.8 million USD more currency than they had sold. Taking into account the economic situation in Belarus, it can be considered as a good result.
In February, the situation on the currency market of Belarus will seem calm. Population will be keen to spend the money, to buy goods at pre-devaluation prices. The demand for the currency by the business entities is unlikely to grow significantly, since import operations now are very risky. Businesses can increase sales of currency, as ruble loans are still very expensive, while businesses need funds for ongoing activities.
Translated from “Belorusy i rynok”