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Belarus lowers discount rate in response to flight of Russian speculative capital

March 21, 2012, 18:05 UTC+3

Yermakova said that “now the discount rate will be fluctuating smoothly”

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MINSK, March 21 (Itar-Tass) —— The national bank of Belarus in March lowered the discount rate by five percent in order to stop the flight of Russian speculative capital and prevent a weakening of the Belarussian ruble, the National Bank’s board president, Nadezhda Yermakova told the Belarussian government-published daily Respublika.

“We made a decision to lower the discount rate, because short-term speculative Russian capital appeared on our interbank market and there emerged the risk of a weakening of the national currency,” she said. “That was one of our countermeasures. We lowered the discount rate and the rates on the deposits at the National Bank, we sterilized liquidity at a lower interest rate and thereby prevented interventions. By now the influx of speculative capital from the outside has run dry. True, it has not stopped altogether, but Russian companies have far less interest in parking their cash here. The Russians consider these rates low. Incidentally, more than 100 million US dollars came to the interbank market, but this money will soon be gone. The cash was placed for a very short time.

Yermakova said that “now the discount rate will be fluctuating smoothly.”

In any case one should not expect a five-percent downgrade, like the one witnessed in March.

She said that according to National Bank forecasts the discount rate is to go down from the current annualized 38 percent to 20-23 percent, or possibly to a lower point.

Asked about the possibility of another redenomination, Yermakova said that “against the backdrop of the national currency’s devaluation and at the level of inflation that was observed last year it is too early to speculate about re-denomination.”

“First and foremost we must restore economic growth and ensure the stable functioning of the monetary and credit system, to achieve a situation where interest rates would at least be acceptable, below ten percent. Then it will be possible to discuss that issue. But one should bear in mind that any denomination always causes a certain growth of inflation. It should not be ruled out that we may decide to do away with the extra zeros when the people’s incomes grow and our wallets will prove too small for thick wads of cash. But that will happen not today or tomorrow.”



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