Recent legal & business developments in Belarus, April 2011
1. The most significant development lasting throughout April 2011 was ongoing foreign exchange crisis. In late March – early April the National Bank of Belarus (NBB) with the view to mitigate consequences of falling FX reserves had taken a number of administrative steps to limit currency out-flow and mitigate consequences of the bad current account, including limiting settlements under import contracts exceeding EUR 50 000, introducing priority rules for conversion of rubles into currency and restricting foreign cash turnover.
Many of the businesses engaged in importation of foreign products and equipment were affected by these measures and faced severe shortage of foreign currency to settle their current import operations. In response, the NBB repealed previously effective 10%-above-official-rate margin limitation applicable for over-the-counter sales of foreign currency and distanced itself from the problem of currency shortfall declaring it would not take any further administrative measures until receipt of the stabilization loan from Russia. Therefore until mid-April currency funds were only available to companies from over-the-counter market – by purchasing Euros and Dollars from their servicing banks or from other companies through the servicing banks at speculative rates that exceeded the official exchange rate by 30-75%. At the same time currency in cash was still unavailable.
Towards the end of the month the National Bank and Government announced that an alternative trading session will be introduced at the Belarusian Currency and Stock Exchange (BCSE) without any margin limitations applicable in an attempt to learn the realistic market value of ruble against foreign currencies. At the same time it was reported in the media that the National Bank issued an informal recommendation to limit the exchange rate on over-the-counter market by 4 500 rubles per 1 U.S. dollar which effectively freeze the only realistic source of foreign currency for companies, since the market considered this exchange rate too optimistic. For about a week there were only singular exchange transactions and businesses were eagerly awaiting start of the alternative exchange session at the BCSE to acquire some currency funds and settle their obligations falling due.
However, on Tuesday 26th April the NBB declared that it deems hosting an alternative trading session “unreasonable”. Financial experts reportedly considered this decision as a fear of revealing realistic scope of “informal” ruble devaluation, since currently in Belarus there is a unique situation when triple exchange rate exists:
- the NBB’s official exchange rate, at which only importers preferred by “priority rule” may purchase currency through BCSE for specific purposes (payments for natural gas, medications and some others)
; - speculative exchange rate, at which over-the-counter exchanges are made between banks and their clients and which is 30-70% higher than the official rate
; - speculative exchange rate of the “black market” for cash transactions of individuals, which is 30-40 % higher than the official rate.
As of now, it is still unclear how the National Bank and the Government intend to tackle the exchange crisis. IMF and other international experts recommend implementing devaluation and returning to the single-rate policy.
3. As a positive development,
