Major bank suspends loans in local currency
The PriorBank, the leading banker in Belarus, on Friday issued a statement through the Interfax news agency that it suspended issuing loans in the Belarusian rubels to the population due to the “narrowness and expensiveness of the money market”.
It is worth noting that the bank’s official web site had no word about the move.
According to unofficial reports, other banks, too, have suspended loans in the local currency. Even by calling a bank, an ordinary Belarusian cannot find out whether the rumors are true.
- Good afternoon. Please tell me if it is possible to get a loan from your bank.
- You need to call on Monday. We are already closed.
- But, generally, is it possible?
- No. You call on Monday, and you will get all the information you need.
Why have the banks stopped the loans? Siarhej Zhbanau, an economic commentator with BelGazeta newspaper told our radio that effective from January 17, the Belarus Central Bank raised liquidity rates, i.e. the ability of assets to turn into money. The measure is to send the banks into the red, if they would continue issuing loans.
“Loss-making on transactions in Belarus rubels is only one side of the problem. The bottom-line is the lack of liquidity, caused, in fact, by the new conditions at the market of energy resources,” Siarhej Zhbanau explains.
The problems could have been avoided, if the government responded timely. But, the authorities predictably pretend as if nothing is going on, by saying that the loan cuts would allow containing the money supply and maintaining the national currency exchange rate in condition of the lack of gold and foreign currency reserves.
Obviously, the government will have to contain the national currency growth. And, the loans in the Belarusian rubels are clearly lucrative. However, the rubels are usually spent to buy foreign currencies to be further used for buying goods. Thus, we can suspect the foreign currency deficit is gaining momentum.
What are the possible consequences of this situation?
“Definitely, this situation will not end up in good. The new performance targets of the Belarusian major industries need a steady flow of a fresh financial blood. But, if banks stop issuing loans, those targets will never be accomplished. Neither the trade sector nor the industry will survive on their turnover assets only. It means we could expect a variety of negative consequences,” Siarhej Zhbanau explains.
Clearly, the banking sector cannot function in the old way. Therefore, banks deem it logical to suspend loaning. Should Belarusians wait for the change in behavior of the authorities and the banks? While we are looking for an answer, people are looking for dollars in the ForExes.