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Belarus Politics December 2021

Belarus: Belarusian ruble collapses amid fresh round of sanctions

The Belarusian ruble suffered significant losses in November, with the depreciation intensifying shortly after the announcement of a new round of sanctions by the EU in the middle of the month. On 26 November, the Belarusian ruble was worth 2.56 per USD, which was down 5.5% from the same day in the previous month. However, the currency was up 0.3% year-on-year and 2.0% year-to-date on the same day.

Tensions have been running high on Belarus’ border with EU countries due to the latest migrant crisis in the region. The alleged use of migrants for political purposes triggered further sanctions from the trade bloc in mid-November, targeting transportation companies. In addition, sanctions from the U.S., which target vital potash exports, will kick in on 8 December, thus further weighing on the ruble.

Spelling further trouble for the BYN, the country has been facing a spike in Covid-19 cases since August, which has taken its toll on activity, with the emergence of the Omicron variant further clouding the outlook. Notably, a lack of action by the Central Bank, which has not raised rates since July, while regional peers have tightened policy since then, has likely made the Belarusian ruble comparatively less attractive. Together, these factors have created a perfect storm, scaring off investors. Despite all this, President Lukashenko has said he will continue to let migrants cross into the EU, rendering any prospects of an easing of tensions unlikely.

On the outlook for inflation and monetary policy, Piotr Soroczynski, chief economist at the Polish Chamber of Commerce, commented:

“The Belarusian economy is closely related to the Russian economy. The issues of currency and inflation will strongly depend on what will happen in Russia. And what will happen in Russia depends on the raw material market, unless additional factors of a political nature are involved.”

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