Stanislav Bogdankevich: Crisis will push Belarus to reforms

Stanislav Bogdankevich, the former head of the National Bank, doesn’t rely on the restrictions of currency turnover, as a country that depends on export can’t reject dollar, euro or currency exchange.

“Belarusian Partisan” reported that the Belarusian authorities are working out a decree that will limit the turnover of the U.S. dollar and euro in the country. After the adoption of the decree citizens must get rid of the dollar and the euro within two months. The accounts in foreign currency will be automatically converted into the national currency. Those who travel to other countries will be able to buy foreign currency only by special request.

 “EuroBelarus” Information Service asked Stanislav Bogdankevich, the former chairman of the National Bank of the Republic of Belarus to comment on the possibility of such a decree:

- How realistic is this apocalyptic scenario?

- Personally, I do not think that the authorities would agree to such extreme and unpopular measures, especially because these actions will not lead to a recovery in economy. We are an open republic with an open economy, we depend on export and we are not isolated from the rest of the world. These are speculations based on negative expectations related to the crisis of Belarusian economy. On the contrary, I believe that the crisis will push the country to reforms – well-considered, scientific, smart reforms. I am 99 per cent sure that such actions are ruled out; there remains only 1 per cent of probability. But we are not yet senile, are we? It is kind of an Asian solution, but apparently even in Asia it does not exist. If the authorities feel that the economy will come to a complete collapse, they may agree to extreme measures: to limit the issuance of currency, to tighten the procedure of purchase of dollars and euros, to introduce extra taxes on purchase of exchange.

- Belarusians do purchase the currency very actively: in October the citizens of Belarus purchased currency by 16,9 per cent more than they did in September.

- This is another evidence of negative expectations the population has. We are in the stage of recession and stagnation of GPD, the inflation rates are galloping. The inflation rate in neighboring countries is represented by a single digit, while in Belarus it is a double figure. The expectations are unfavorable, but the solution should not necessarily be Asian-like. The recipe is well-known: not to pay salary beyond the GDP growth and labor productivity; to live within the means; to promote business competition, develop small and medium businesses.

- What can the increase in purchase of foreign currency lead to?

- We may eventually switch over to dollar or Russian ruble. If we ourselves can not limit the growth of the empty money supply, then maybe we should pass to another currency as some Latin American and African countries did?

Such variants appear because of the negative expectations related to the real problems in the economy that are quite solvable. The situation may result in some administrative restrictions, but not in the spirit you have described. The administrative restrictions may concern the interest rates, deposits or loans. How can a country that depends on export reject the dollar, euro or currency exchange? It is easier to reject the Belarusian ruble, its status is absolutely evident: no produce at all, but the amount of empty papers is enormous! But within 20 years we have been through the worse. It is possible to purchase currency by selling the assets, but now it is better to keep them – the market is very bad, it is not on our side. And as long as Lukashenko sells the sovereignty in return for Eurasian integration, Russia will still be paying.