The refinancing rate of the Republic of Belarus is interesting not only for the residents of this country. This topic is of interest to anyone interested in macroeconomic policy. It’s not a secret to anyone that the inflation rate in a fraternal country is prohibitive. Until recently, all Belarusians were millionaires. The situation is similar to the one in Russia. At one time, 6 zeros were also applied to notes. So what does the refinancing rate in Belarus depend on? We’ll try to figure it out.
What is the refinancing rate?
The refinancing rate is the main indicator by which the macroeconomic situation in the country is determined.
It shows the percentage at which the Central Bank gives money to commercial banks. The higher the rate, the more expensive loans are for households and businesses. After all, commercial banks will not give money to citizens at a loss. But the refinancing rate will not be lower than inflation in the country.
The situation before the denomination
The situation with millionaires and billionaires in the country worried everyone for a long time.
One could see various flash mobs on the Internet when students bought soda for a suitcase of money.
The inflation rate was so high that the refinancing rate in Belarus reached 26%. Two paradoxical things happened in this situation:
- The growth of inflation, which times "jumped" around 30% per annum.
- The ban on the authorities to increase the face value of banknotes.
What does it mean?
The economy is useless to order. It is impossible to “ban” inflation by administrative methods, no matter what good intentions arise. But what does 30% inflation mean? The Russians living in the nineties of the last century forgot about it. The crisis of 2016 slightly refreshed memory. Inflation of 30% means that with the money hidden under the pillow, today, in a year, you can buy 1/3 less of the goods.
For example, take the sale of a TV. Its price is 10 thousand Russian rubles. With inflation of 30%, the cost of this TV will increase by at least this amount. In a year, the price will be 13 thousand rubles. And the citizen has “under the pillow” only 10. Therefore, now he can buy a TV, and in a year 3 thousand rubles will not be enough for him. on the same model.
In fact, a lot of conditions affect the price: factors of production, supply and demand balance, etc. But inflation is one of the main reasons for pricing. The refinancing rate in Belarus (and not only in it) directly depends on it.
The ban on increasing the face value of banknotes gives rise to a situation where the population is forced to go to the store with bags instead of wallets. Imagine the price of a refrigerator is several million, and the maximum bill is 100 rubles.
Of course, you can’t imagine a better incentive to switch to e-commerce, but middle-aged and elderly people are distrustful of it. The situation needed to be changed.
“Strange” Belarusian denomination
On July 1, 2016, an event occurred that was predicted for several years. A denomination has occurred. In simple terms, zeros crossed out the notes.
But the denomination was called "strange." The Belarusian ruble immediately lost 4 zeros. Instead of a million, it became 100 rubles, instead of 1 thousand - 10 kopecks.
Causes
Two reasons for this denomination are mentioned:
- Belated reform. The denomination needed to be done earlier.
- Forecasting inflation. This means that the refinancing rate in Belarus will be even higher in the future.
Macroeconomic situation after denomination
Be that as it may, but after "trimming zeros" the situation has changed a bit.
The refinancing rate of the National Bank of the Republic of Belarus today fell to 20%. This became possible due to the slowdown in inflation.
Factors affecting the size of the refinancing rate in Belarus
- Inflation.
- Macroeconomic policy of the state.
- The price of oil and petroleum products.
- Macroeconomic situation in Russia.
What does Russia have to do with it?
If hydrocarbon prices strongly influence inflation and the macroeconomic situation in the Russian Federation (recent events have confirmed this), in Belarus they depend on the situation in Russia.
We will explain with a specific example. Almost the entire economy of the fraternal republic is based on trade relations with Russia. And here is a paradoxical situation. Belarus sells hydrocarbons worth hundreds of billions of dollars to Russia. Some citizens of the Russian Federation are likely to be outraged, they say, how so? This cannot be!
But to convert oil to gasoline is cheaper in the fraternal republic. This is due to the following factors:
- Fiscal policy of both states.
- Customs duties.
- Wage level.
That is, the situation is such that it is cheaper to take oil from Russia to Belarus with the goal of refining into gasoline than in Russia.
If the macroeconomic situation in the Russian Federation worsens, this also affects Belarus.
The authorities of the fraternal republic have already stated that devaluation in Russia will not affect Belarus in any way. But experts note that today's denomination is precisely evidence of a worsening situation.
Psychologically, price increases are less noticeable. Compare the growth of 1000 rubles or 10 cents. This was similar in the Russian Federation in the late 90s. early 2000s.
Starting from July 1, export duties on oil and oil products, on crude oil, on straight-run gasoline, and on commercial gasoline are increased. Where does Belarus come from? That's right, resale and processing of raw materials from Russia. By the way, the brotherly country officially received permission to resell Russian crude oil to other countries.
The Belarusian economy rests on this rather than on BelAZs, MTZ and potatoes. In fairness, let's say that most of these products are also sold in Russia. Therefore, the deterioration of the economic situation in the Russian Federation cannot affect Belarus.
From the recent speeches of President Lukashenko it is clear that the agricultural products of the “good neighbor” in Russia are least wanted to be. Various administrative barriers are placed. The devaluation of the Russian ruble doubled hard on the Belarusian economy. The price of agricultural products in the Russian Federation fell by half (in real, not nominal terms), which made Belarusian goods not as acceptable as before. Manufacturers from Belarus have to reduce costs, which reduces the country's budget.
Loss of income forms a deficit. Fulfillment of social obligations “forces” to print money. And this accelerates inflation, on which, in turn, depends on the currency refinancing rate in Belarus. The illustrative principle of dominoes.
The crisis in Belarus
The following facts that occurred after June 1, 2016 also indicate a deterioration in the economic situation:
- Some types of cigarettes have risen in price.
- Export duties on petroleum products increased, as we mentioned above.
- Denomination of the national currency.
Such measures, as they say, are not from a good life. Belarus is one of the few countries that is trying not to tighten fiscal policy and not increase taxes and fees.
Denomination history
Since July 1, 2016, the denomination in Belarus is not the first in the recent history of independence:
- The first was associated with the transition from Soviet rubles to the national currency of Belarus. The country did not come up with its name, they left the previous name - the ruble. For 10 old Soviet in 1992, they gave 1 new Belarusian. In 1994, due to inflation, one zeros had to be removed.
- The second took place in 2000. The currency this time “lost weight” by three zeros.
- The third occurred in July 2016. Now the Belarusian ruble has immediately lost four zeros.
Such measures indicate that the authorities can not overcome inflation in the country. And the refinancing rate directly depends on this, which, recall, today is 20%.