Belarus Steps Up Capital Controls to Stem Ex-Soviet Currency RotZulfugar Agayev
Belarus imposed capital controls that include a fee on all foreign-exchange purchases, as the fallout from Russia’s biggest currency crisis since 1998 spread across the former Soviet Union.
The measures announced by the central bank in Minsk range from an increase to 50 percent of the share of mandatory sales of foreign revenue for companies to a 30 percent charge on currency purchases by individuals and legal entities, according to a statement today. The regulator also raised interest rates on its liquidity operations to 50 percent and instructed banks to halt issuing local-currency loans until Feb. 1.
The central bank said it was reacting to the situation in neighboring countries, primarily in Russia, and sought to “prevent the development of negative tendencies on the currency and financial markets of Belarus and raise the attractiveness of savings in Belarusian rubles.”
Belarus is the first ex-Soviet republic to fence off its economy as Russia’s financial crisis ripples through the region. President Aleksandr Lukashenko yesterday said his government had no plans to follow the devaluation of the Russian ruble, which has lost more than 44 percent against the dollar this year.
“This is clearly driven by strong pressure on the Belarusian ruble,” Vladimir Osakovskiy, the chief economist for Russia at Bank of America Corp. in Moscow, said by e-mail. “Such drastic measures will likely stabilize the currency, at least for now.”
The Belarusian currency has slid 7.9 percent this week against the dollar, the worst performance among all currencies tracked by Bloomberg. The nation’s bonds maturing in January 2018 have tumbled 12.4 cents in December to 94.5 cents on the dollar by 3:14 p.m. today in Minsk, headed for a record monthly selloff.
“For importers and people, this basically means a 30 percent devaluation,” Kateryna Bornukova, senior analyst with BEROC research center in Minsk, said on the group’s website today. “This is a half-baked measure, which the central bank is hoping will cut devaluation expectations. The population and importers will reap all the minuses of a devaluation.”
Other regional currencies under pressure include the Kazakh tenge, Georgia’s lari and the Armenian dram, according to Bank of America. Azeri President Ilham Aliyev said two days ago that his country will continue to support the manat’s value for “social” reasons.
For his part, Lukashenko today said Belarus was “strong enough” to overcome even the “worst scenario.” He asked people not to worry and prepare for Christmas and New Year’s celebrations instead.
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