Defending The Ruble: A Difficult Task

BMI View: Doubtless affected by the cost of shoring up the ruble, the National Bank of Belarus has, since early February, been permitting a very limited weakening of the unit within the narrow band it maintains against the dollar. Despite talk of a 20-25% devaluation, however, the government is at present committed to maintaining the de facto peg in order to prevent dollar-denominated gas import prices from rising. This will mean heavy borrowing as well as a rushed and potentially unsuccessful sell-off of state owned assets. With slowing growth, a widening current account deficit, and double-digit inflation likely this year, some ruble depreciation is expected, and a sharp devaluation is still a possibility.

To read the full article, please choose one of the following options: