Belarus Relaxes Capital Controls Used to Fight Russian ContagionAliaksandr Kudrytski
The Belarusian central bank allowed the country’s ruble to plunge 6.6 percent and cut the fee on foreign-currency purchases by individuals as it adjusted to spillover from Russia’s worst currency crisis since 1998.
The levy on currency purchases was lowered to 10 percent from 20 percent, effective tomorrow, the central bank in Minsk said in a website statement. The official exchange rate against the dollar was set at 12,740 rubles on Jan. 6, down from 11,900 rubles today, following a 20 percent drop last year.
The moves are among “steps taken to normalize the situation in the financial sector,” the central bank said in the statement. The decisions are also “aimed at bringing about the convergence of exchange rates on different segments of the currency market.”
Belarus, a former Soviet republic whose main exports include potash, tractors and refined oil products, is reeling from the crisis in Russia, its biggest trade partner. Multiple exchange rates have proliferated since the introduction of capital controls by Belarus more than two weeks ago as the central bank maintained the official rate while instructing commercial lenders to charge currency buyers an additional fee, which was initially set at 30 percent.
Russia is on the brink of recession after sinking oil prices battered its currency and U.S and European sanctions imposed over the conflict in Ukraine stoked capital outflows. Contagion from the Russian ruble’s 46 percent decline last year has spread across the former Soviet Union, putting pressure on currencies from the Kazakh tenge to the Armenian dram.
“When the fee to purchase foreign currency is finally scrapped, businesses will get some degree of certainty and multiple exchange rates will vanish,” Kateryna Bornukova, senior analyst with BEROC research center in Minsk, said in an e-mailed comment today.
Belarus’s international bonds slumped to a record. The price on dollar-denominated debt maturing this August dropped 1.9 cents to 92.3 cents on the dollar as of 5:43 p.m. in Minsk, sending the yield to 23.86 percent, the most since the notes were sold in 2010. The yield on the government’s dollar bonds due January 2018 climbed 85 basis points to 13 percent, the highest since 2011.
Belarusian President Aleksandr Lukashenko, who has ruled the nation of 9.5 million for two decades, on Dec. 27 replaced the prime minister, the head of the central bank and other top officials less than a week after the authorities restricted access to foreign currency.
The central bank would have to devalue the ruble even further to match the exchange rates commercial banks are charging individuals to convert rubles into dollars.
The Russian currency’s devaluation has already cost Belarus $740 million in lost export revenue, then-Prime Minister Mikhail Myasnikovich was cited as saying Dec. 21 by the news agency Belta. Another $320 million left when Belarusians began buying cheaper cars in Russia, Myasnikovich said.