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8.0 Financial & capital markets 8.1 Bank sector overview
The financial sector remains a contingency liability to the government
and a potential risk for macroeconomic stability, despite some improvements. Regulatory NPLs (the three riskiest categories) have stabilised, reaching 12.8% of gross credit exposure in 3Q17 due to the improved macroeconomic backdrop leading to lower interest rates and lower exchange rate volatility.
Capitalisation levels have improved somewhat, but remain modest given high credit risks. The large presence of the public sector (65% of assets) creates fiscal risks for the sovereign due to the potential need of further capital injections, execution of guarantees and issuance of securities in exchange of loan transfers.
8.2 Central Bank policy rate
The National Bank of the Republic of Belarus (NBRB) left the monetary policy rates on hold on February 13 at 10% for the refinancing rate and 11.5% for the overnight rate.
The decision comes on the bank of moderating inflation. The central bank also said that inflation in Belarus in the first half of this year is expected to be on par with 2018, the Chairman of the Board of the National Bank of the Republic of Belarus (NBRB) Pavel Kallaur told BelTA on February 6.
“Inflation in the first half of the year is expected to exceed this year's inflation target. Because the negative pressure on the part of the already existing temporary factors will not go away in the blink of an eye. Although their influence will fade away gradually.”
The decision to keep rates on hold was to leave the refinancing rate and the overnight lending rate as they are when external economic conditions are uncertain, but the bank remains confident it can hit this year's inflation target without adjusting the monetary conditions.
“In 2018 inflation totalled 5.6%. So it can be 5.5% or 5.8% this year,” the NBRB chairman said in a statement. “The monetary management policy will remain neutral against the background of balanced growth. As a result, inflation will slow to figures determined by the target indicator [5%],” Kallaur said.
The next session of the NBRB Board to discuss monetary management policy is scheduled for 3 May.
The National Bank of Belarus (NBB) intends to cut its benchmark interest rate to 14-16% by the end of 2017 , its deputy chairman Sergei Kalechit said on October 4.
30 BELARUS Country Report March 2019 www.intellinews.com