By Aleś Hudzija
Belarusians follow exchange rates like weather forecasts to make their plans. They sold $292 million more in foreign cash than they bought in 2023, despite a significant government-reported increase in their income.
Foreign currency, especially the US dollar, is more than just a means to keep savings for Belarusians. Rubel depreciation, high inflation and mistrust in the banking system make them measure income and savings in foreign currency.
Low confidence in the national currency drives dollarization. The nation is sensitive to foreign exchange fluctuations because of high exports and people’s uncertainty about the rubel.
Belarusians keep savings in foreign currency
Many Belarusians prefer to keep their savings in US dollars and euros.
In times of relative prosperity, when people’s income rises, households make a safety cushion in the foreign currency deposits and cash savings. Foreign currency deposits decreased by half in the last seven years to $4.6 billion.
Individuals’ foreign currency deposits, US$ million
The National Bank of Belarus (NBB) reported that Belarusians bought $9.8 billion and sold $10.1 billion worth of foreign cash in 2023. The difference makes $292 million.
For the third year in a row Belarusians are net sellers of foreign currency. In 2021, the difference was $53 million, and in 2022, $26 million.
Purchase/sale of foreign currency by individuals, US$ million
Difference (red); purchase (orange); sale (blue)
During the turbulent year of 2020, the population bought $1.9 billion more foreign cash than it sold. In the following years, people spent their savings to maintain the level of consumption following a decline in real income. In addition, foreign cash was taken out of the country by emigrants.
Sanctions, restrictions on international transfers, changes in transport and logistics chains, as well as business relocations and emigration after 2020 have made the foreign exchange market more dynamic. Both cash and non-cash foreign exchange transactions were high between 2020 and 2023.
Paradox of 2023
Belarusians usually sell more foreign cash than they buy when it comes to paper money, and remain net buyers when it comes to online transactions.
Difference between purchase/sale of foreign currency by individuals, US$ million
Paper money (orange); online (blue)
When income rises, Belarusians usually buy more foreign currency. However, in 2023 higher wages and lower inflation did not increase the demand for foreign currency. Despite a favorable economic environment, people sold foreign currency and withdrew foreign currency deposits.
Economic sanctions, closed borders, issues in doing business with foreign partners and the toxic business environment forced many companies and high-skilled workers to leave Belarus. Many took their foreign currency savings with them.
Some companies found ways to circumvent the sanctions, so they needed more foreign currency.
A shortage of skilled labor prompted employers to raise pay to retain workers. People save more, usually converting savings into foreign currency. Demand for foreign currency increased at the end of last year due to higher rubel incomes and inflationary expectations.
It took about a year and a half for the Belarusian currency market to return to its usual behavior – the conversion of household savings into foreign currency.
After the 2020 turmoil, the authorities have never managed to restore confidence in the Belarusian currency. Obviously, they would like to prevent the resurgence of demand for US dollars and euros. Inflationary pressures increase as trade surplus narrows. In addition, Minsk spent some of its foreign currency reserves to repay debts to Russian creditors.