Исследовательский Центр ИПМ
Kasrtyčnicki Ekanamičny Forum

How to Improve Monetary Policy in Belarus?


After the currency crises of 2009 and 2011, ineffectiveness of monetary policy based on fixed exchange rate in conditions of Belarusian economy became obvious. In spite of the fact that exchange rate has been more flexible since autumn 2011, it is not flexible enough to balance foreign trade. First, overvalued Belarusian ruble reduces price competitiveness of Belarusian goods and services. Second, disequilibrium in the foreign exchange market leads to an increase in devaluation expectations and periods of significant liquidity deficits in the banking system. An increase in demand for foreign currency led to a large liquidity deficit in the banking sector in October 2012. Interest rates on interbank loans in Belarusian rubles increased on average more than twice, which resulted in a significant rise in interest rates on deposits and loans to individuals and legal entities. An increase in the foreign trade deficit and demand for foreign currency in July 2013 again led to a liquidity shortage, which reached its peak in October-November. What can be done to eliminate or at least reduce the probability of the problems mentioned above? One of the possible recipes for monetary policy can be the transition to the inflation targeting regime.