Business week writes Belarus devaluation spreads panic:
A sharp devaluation of the Belarusian ruble has spread panic throughout the country, with people sweeping store shelves and queuing up at currency exchange offices on Wednesday in a desperate attempt to protect their savings.
President Alexander Lukashenko promised that the national currency will remain stable following the devaluation enacted a day earlier, but experts warned the Belarusian ruble will continue its nosedive if Russia doesn’t provide a quick bailout.
The ruble lost nearly half of its official value against the dollar Tuesday, when the National Bank ordered a devaluation. The new official rate is 4,930 rubles per dollar, up from the previous 3,155 but the perceived value of the local currency is much lower — on the black market it takes 6,000 rubles to buy a dollar.
To make matters worse, there is a physical shortage in the country of dollars and euros, which companies and households desperately want to own to protect themselves from a worse devaluation in the future.
The government has tightly regulated sales of hard foreign currency and its own reserves are badly depleted. Exchange offices have run out of foreign currency because they are allowed only to sell what they buy from clients.
Andrei Krylevich, 42, has spent a week in lines outside an exchange booth in downtown Minsk without a chance to buy a single dollar. The computer company he works at has sent its employees on an unpaid leave, and he urgently needs to pay back a $9,000 loan to a bank.
“In just one month, I have virtually turned bankrupt, the entire country has gone bankrupt,” Krylevich said.
Most Belarusian industries are state-owned, and the government has tried to keep its scarce currency reserves for vital imports. On Tuesday, it set tight limits on interbank currency trading, effectively stifling the market.
The flamboyant Lukashenko, in power for nearly 17 years, has kept an unusually low profile in recent weeks as his government has been pleading Moscow for a vital loan. Russia has been reluctant to provide it, pushing Belarus to sell its industrial assets.
Russia’s Finance Minister Alexei Kudrin said Tuesday that Belarus can get the total of $3 billion in loans from an economic alliance of several ex-Soviet nations over the next three years, including the first $800 million disbursement that could be delivered next month. Kudrin added that Belarus could earn another $7.5 billion by privatizing its industries, most of which remain in state hands.
Events like these are likely to occur more and more in Europe, in particular Eastern Europe, but also in many other emerging markets.
Note how the dollar is still well accepted as a stable flight to safety when other currencies fail. That’s why I marked that one part in bold: This is a perfect example for what happens when credit crunches hit emerging market economies.
Global deleveraging is always rather likely to exert an upward pressure on the Dollar and on gold as well as the chickens of cheap global credit come home to roost.
By the way: It’s comical, but absolutely typical, for any actions taken by government officials, that “Lukashenko promised that the national currency will remain stable”! As if the affected people had any choice in the matter to begin with!! =)