Russian Ally, the Country of Belarus Is Gripped by a Currency Panic
Has banned all over-the-counter foreign currency trades, is blocking independent news sites and online shopping
Belarus government just created a currency panic for itself.
It stubbornly maintained a currency peg to the dollar at a level that had become unrealistic.
It intended to fight the inevitable devaluation by curtailing its citizens' freedom to freely convert domestic currency, hitting them with an unprecedented 30% tax if they did so.
The citizens sensibly took this as a signal their currency was in a very bad shape and became all the more determined to convert it into something tangible.
Good thing Russia has moved away from hyper-interventionist policies such as these and trusts a freely-floating ruble instead.
This article originally appeared at Zero Hedge
"We have to do something with these Belarussian rubles," exclaims one Belarussian as she shops to turn worthless rubles (BYR) into physical assets.
As AFP reports, The Belarussian currency was dragged down by the slide of the Russian ruble last week, leading authorities to impose draconian measures, forbid price increases even for imported goods, and warn people against panic.
Now, however, in an effort to stem the flood of hyperinflating domestic prices, authorities have blocked online stores and news websites to stop the run on banks and shops as people scramble to secure their savings.
One of the blocked news websites noted, it "looks like the authorities want to turn light panic over the fall of the Belarussian ruble into a real one," calling the blockages "December insanity."
Today the Belarus central bank shocked its own population when it also announced full-blown capital controls designed, releasing additional measures to stem the "negative trends of currency and financial markets " including raising mandatory sales of FX revenue to 0%, suspending all OTC FX trading (so pretty much all FX), introducing a 30% fee on all FX purchases, "recommending" that banks halt BYR lending until February, and sending 1-yr interest rates on liquidity operations with banks to a eyewatering 50% in hopes this leads to an increase in BYR deposit rates. It will. What it won't lead to is stabilization in the deposit market as the natives realize they too are next up on the hyperinflation train.
- BELARUS HALTS OVER THE COUNTER TRANSACTIONS IN FOREIGN EXCHANGE UNTIL 2017: INTERFAX
Belarus blocked online stores and news websites Sunday, in an apparent attempt to stop a run on banks and shops as people rushed to secure their savings.
In a statement Sunday, BelaPAN news company, which runs popular independent news websites Belapan.by and Naviny.by, said that the sites were blocked Saturday without any warning.
"Clearly the decision to block the IP addresses could only be taken by the authorities because in Belarus the government has monopoly on providing IPs," it said.
Other websites blocked Sunday were Charter97.by, BelarusPartisan.org, Udf.by and others with an independent news outlook.
The blockage started on December 19, when the government announced that purchases of foreign currency will be taxed 30 percent and told all exporters to convert half of their foreign revenues into the local currency.
"Looks like the authorities want to turn light panic over the fall of the Belarussian ruble into a real one," Belarus Partisan website wrote, calling the blockages "December insanity."
Internet shopping websites were also blocked en masse. Thirteen online stores were blocked Saturday for raising their prices or showing them in US dollars, deputy trade minister Irina Narkevich said, Interfax reported.
The government announced a moratorium on price increases for consumer goods and ordered domestic producers of appliances to "increase deliveries" and keep prices the same at the risk of their management being sacked.
Belarussians lined up for hours to clear out their bank accounts and swept store shelves to secure their savings, stocking up on foreign-made appliances and housewares.The Belarussian ruble has lost about half of its value since the beginning of the year, having been hit hard by the depreciation of the Russian ruble since its economy is heavily dependent on its giant neighbour.
With foreign currency swiftly depleted in exchange offices, Belarussians even launched a black market website dollarnash.com where individuals could buy and sell dollars and euros.
This follows the previously noted implementation of a 30% FX transaction tax, which however now that all OTC FX trading is banned for 2 years or longer, will hardly be collected.
$460 million will bring to the Belarusian budget introduction of a 30% tax on the purchase of foreign currency in Belarus. This is the TV channel "Belarus 1" said First Deputy Minister of Finance of the country Maxim Ermolovich.
"Given the daily supply and demand in the foreign exchange market budget revenues will amount to about 5 trillion Belarusian rubles, or $ 460 million at the exchange rate of the National Bank", - he said.
Recall, December 19 NBB announced the introduction of December 20 temporary levy of 30% on the purchase of foreign currency for individuals and legal entities in connection with the sharply increased demand for foreign currency in the domestic market of Belarus.
Legal persons will pay the tax on the stock exchange, and individuals - in the form of bank commission when buying foreign currency.
As a result, expect to see more of this...
Keep in mind that the scenes shown above are what the Bank of Japan, the European Central Bank and the Federal Reserve would dub "success."
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