Download National Currency of the Republic of Belarus

National Currency of the Republic of Belarus
Prepared by Darya Makarchyk
After the breakup of the Soviet Union in 1991 and after more than two years of using its currency
and coupon system the new national currency with the old name Ruble was officially adopted. But
due to the increase of inflation during the printing and adopting of new currency, the face-value was
considered ten times as much as it was written on the banknote. That’s why the first denomination
took place in august 1994, only in a year after the adoption of new currency and without the issue
of new banknotes. The second denomination was in the January 2000 with three zeros removed.
The third denomination is being prepared, but will not be realized until the inflation rate is less than
10%.
Prices before denominations
1994
(Jul.)
1999
(Dec.)
2014
(Aug.)
Prices (BYR)
Milk (1l)
2 500
Bread
1 500
Potatoes (1 kg)
1 000
Milk (1l)
35 000
Bread
30 000
Potatoes (1 kg)
25 000
Milk (1l)
10 000
Bread
9 500
Potatoes (1 kg)
4 000
Average wages
815 459
34 871 899
6 364 471
Source: National Statistical Committee of the Republic of Belarus. – Access mode: http://belstat.gov.by/en/
The policy pursued in the country in 1995 – 2014 is characterized by the variety of instruments for
the exchange rate adjustment. One of the differences between the Republic of Belarus and other
CEECs was the use of multiple exchange rates at the initial stage during several years.
1993-1995 – floating exchange rate
In 1993 the National bank of the Republic of Belarus started to use the floating exchange rate regime
with the interventions. The floating exchange rate was chosen due to:


high inflation rate (1290,2% in 1993, 2321% in 1994, 809,3% in 1995);
lack of freely convertible currency;


lack of monetary reserves and absence of gold reserves;
increase of trade deficit.
1995-1996 – fixed exchange rate
After the presidential election in 1994 the government established a programme, the main purpose
of which was to reduce the inflation and create the conditions for future economic growth in the
country mainly with a help of fixed exchange rate.
Government interventions in the functioning of financial markets resulted in the formation of
parallel foreign-exchange market. At the end of 1996 the difference between the official and parallel
market exchange rates was more than 40%. This led to the decrease of industrial efficiency,
investments in GDP and the increase of trade deficit.
1996-2000 – managed float
The exchange rate was determined by the National Bank according to supply and demand for foreign
currency taking into account the rate of inflation.
In 2000 the National Bank toughened the monetary policy and started the systematic devaluation of
the official exchange rate of roble which equaled to 110,9% in the first half of 2000 and 268,8% for
the whole year.
2000-2009 – sliding peg
Since 2000 the exchange rate of ruble linked its value to the Russian ruble and U.S. dollar because
of the: 1) high share of Russia in the structure of foreign trade and high rate of dollarization of the
economy; 2) necessity to create the prerequisites for the adoption of common currency with Russia;
3) necessity to reach the smooth and predictable dynamics of the Belarusian ruble exchange rate.
2009 – 2011 – link to currency basket which included the Russian ruble, Euro and U. S. dollar in equal
shares that allowed to smooth the exchange rate fluctuations and ensured the stability of the
exchange rate within the fixed corridor.
2011 – flexible exchange rate
Last years the economy of the Republic of Belarus was confronted by the number of difficulties like
the increase of prices for power resources (from 2006 to 2010 the prices for gas went up by 3,9
times, for oil – by 1,7 times), world economic crisis that resulted in the decrease of the external
demand and of prices for exported goods.
The monetary policy was aimed to prevent the sharp decrease of production, bankruptcy of
enterprises and increase of unemployment. But the adjustment of monetary policy was inevitable in
the context of the crisis of 2011 in the Republic of Belarus.
With the beginning of the crisis the excessive domestic demand stimulation and fixed exchange rates
resulted in the increase to 24 % of deficit of the current account of balance of payments in the first
quarter of 2011. To maintain the exchange rate of the ruble the National Bank exhausted the main
part of its currency reserves.
Figure 1 - BYR/USD (taking into account
denomination in 2000)
10000
9510
9000
8350
8570
8000
7000
6000
5000
4000
3000
3000
1920
2000
2170
1180
1000
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1998
1997
1996
1999
320
11,515,5
1995
0
In March 2011 the control of the
capital flow led to the emergence
plurality of exchange rates. On
the 24th of May the Belarusian
ruble was devaluated by 56%. At
the same time the market
exchange rate was even lower.
In the October 2011 the plurality
of exchange rates was eliminated
and the exchange rates were
unified. The new exchange rate
on the 21th October was 8680
rubles compared to 5720 rubles
the day before. The devaluation
of currency amounted to 52 %
(Figure 1).
Source: National Bank of the Republic of Belarus. – Access mode:
http://www.nbrb.by/.
Figure 2 - Rate of inflation (%)
300
Currently one of the main purposes of
the monetary policy of the National
Bank is the reduction of the inflation
rate to the 11% in December of 2014.
In the whole, during the last years the
inflation rate corresponds to the
predictable one (Figure 2).
250
244
200
150
100
50
0
108,7
107,5
46,1
14,4
21,8
6,6
16,5
9,9
Source: National Statistical Committee of the Republic of
Belarus. – Access mode: http://belstat.gov.by/en/
The exchange rate of ruble is determined according to demand and supply, but the National Bank
still has the right to intervene in this process through the purchase and sale of currency. The situation
in the national economy and in monetary and credit sphere is quite stable.
References:
1. National Statistical Committee of the Republic of Belarus. – Access mode:
http://belstat.gov.by/en/
2. National Bank of the Republic of Belarus. – Access mode: http://www.nbrb.by/
3. Alymov, U. V. About the way to the uniform exchange rate of the Belarusian ruble. - Bank
Bulletin Magazine. – 2011. - №11. - Access mode: http://www.nbrb.by/bv/arch.asp?id=540.
4. Gavrilov, V. Currency market in the Republic of Belarus: state diagnostics. – Bank Bulletin
Magazine. – 2002. - №5.