Currency Market and Banking System: Foreign trade miracle

Vadim Iosub


The year 2021 happened to be the most successful year for the Belarusian ruble in the modern history of the country, despite the ongoing political crisis and numerous economic sanctions. Apparently, this took place thanks to the “foreign trade miracle”, i. e. the extremely favorable external environment, particularly, increased demand followed by a rise in prices. Since the causes of this phenomenon were purely external, Belarus was just lucky that prices rose in the exports of goods and services, rather than imports. Nothing suggests that a foreign trade miracle will occur again, while the economic sanctions will be much heavier.


Best year for the Belarusian ruble

Although Belarusians traditionally keep a watchful eye on the U. S. dollar exchange rate, the National Bank of Belarus (NBB) uses the basket of the currencies of its main trading partners–the U. S. dollar, euro, and Russian ruble – for a comprehensive assessment of the ruble dynamics. Given the growing share of the Russian ruble in the foreign trade turnover and transactions in FX on the Belarusian Currency and Stock Exchange, its share in the currency basket was increasing. In 2009, the currencies were equally presented in the basket (one-third each). Since 2016, the share of the Russian ruble has increased to 50%, while the dollar and euro made up 30% and 20%, respectively.

This composition of the basket of currencies is used to estimate the ruble dynamics, but, since it has become difficult to use the dollar and euro in foreign trade payments, the composition is likely to continue to change. All three currencies fell against the Belarusian ruble in 2021 for the first time in the modern history of the country. According to the National Bank, the Russian ruble was down by 1.19%, the dollar by 1.57% and the euro by 9.01%.1 As a result, the value of the basket of currencies decreased by 3%, which is the best result for the Belarusian ruble ever. The euro declined globally the most. During the year, the EUR/USD rate decreased from 1.23 to 1.13 (-7.9%); EUR/RUB – from 90.8 to 84.0 (–7.6%).

The strengthening of the Belarusian ruble cannot be considered artificial. It was possible to raise the ruble exchange rate administratively through a reduction in the gold and foreign exchange reserves, but these were growing for most of the year. The National Bank reported purchases of foreign exchange as one of the reasons of the increase in the reserves, so the NBB’s efforts just slightly restrained the strengthening of the ruble.

According to the NBB, the net sale of foreign exchange on the domestic market stood at USD 1,458.4 million, and all categories of currency market participants registered in the NBB statistics acted as net sellers (Table 1).

  Net sale, USD million
Resident enterprises 678.9
Non-resident enterprises 575.0
Banks 151.1
Households 53.4

Table 1. Foreign exchange market participants as sellers, 2021

As can be seen from the table above, resident and non-resident enterprises made the largest contribution to the net supply of foreign exchange to the domestic market, and this contribution could only be made through net exports growth. This means that the Belarusian ruble strengthened as a result of the market’s behavior: the supply of foreign exchange outstripped demand.

Foreign trade miracle

The all-time high surplus in foreign trade in goods and services made the year 2021 the best year ever for the Belarusian ruble, according to the National Bank. This stemmed from the outstripping growth of exports of goods and services compared with imports.

In 2021, exports of goods and services totaled USD 49,257.4 million (up 32.5% year on year); imports – USD 45,487.0 million (up 28.9%). The deficit in trade in goods stood at USD 791.1 million, while trade in services showed a surplus of USD 4,561.5 million. Outstripping growth of exports was observed in both trade in goods and services.

The deficit in trade in goods was the lowest since 2012, though. Like the overall balance of trade in goods and services, the balance of trade in services was the best since 2000.

According to the Foreign Ministry, products of the petrochemical, machine-building, metallurgical, woodworking and light industries, dairy and meat products, furniture, glass, fiberglass, and cement were the largest export commodity groups in 2021. Russia remained the main trading partner of Belarus, accounting for 49% of foreign trade in goods (41% of exports and 57% of imports).

The European Union was the second largest trading partner with about 20% of the foreign trade turnover. Germany, Poland, the Netherlands, Lithuania, Italy, Latvia, France, Belgium, the Czech Republic, Sweden, and Spain were the key importers of Belarusian products in the European Union. Ukraine also remained an important market, accounting for 13.6% of exports of goods.2

According to the Belarusian National Statistics Committee (Belstat), the largest importers of Belarusian services were the European Union (31% of the foreign trade turnover), Russia (30%), the U.S. (11%), and China (4.5%). In the exports of services, transportation accounted for 43% of the total, up 19% (by USD 690 million) from 2020; IT services – for 29%, up 20% (by USD 495 million).3

Cause of the miracle: favorable environment and deferred effects of the sanctions

The unexpectedly favorable market environment was the main cause of the unprecedented surge in exports of goods and services. The world economy’s recovery after the slowdown caused by the pandemic in 2020 was considerably above forecasts and expectations. This led to a significant increase in prices of raw materials and farm products, as well as growth of demand for freight transportation and its prices.

In 2021, Brent oil rose from USD 50 to USD 80 per barrel (+60%), which entailed an approximately proportional increase in prices of oil products exported from Belarus. The rise in world prices affected almost all major exports of Belarus, including chemical and petrochemical products, inorganic fertilizers, metal products, timber, wood products, construction materials, agricultural raw materials and foods.

In spite of the first wave of relocation, the almost entirely export-oriented IT services sector showed inertial growth by around 20%, although the rate of this growth slowed down against the previous years. The recovery of business activity in the neighboring countries contributed to the increase of freight traffic (both to and from Belarus and transit) primarily by rail and road.

The sanctions imposed in 2021 had little effect on Belarus’ exports. They either were not designed to, being targeted at particular persons, or were deferred and had a number of exemptions. For instance, the sanctions imposed in summer 2021 concerned the potash, oil refining and, partly, the banking sectors. They provided for a six-month delay for entry into force, the need to execute already signed contracts, an exemption for some products, etc. Therefore, the sanctions virtually did not affect Belarus’ exports or the ruble exchange rate until the end of 2021.

According to Belstat, average commodity export prices rose in 2021 by 24.4% year on year, while the index of physical volume only increased by 9.9%. In other words, Belarusian exporters managed to respond to growing demand by raising prices and, much more modestly, by increasing output of commodities for export.

The ‘foreign trade miracle’ was basically a result of extremely favorable external factors, i.e. growing demand and, consequently, rising prices, rather than wise industrial policy, marketing breakthroughs, or conquering market with new products. Belarus was just lucky that the rise in prices mostly took place in the exports of goods and services, rather than imports. So much for a miracle.

Banking system: sanctions, flows of deposits, withdrawal of foreign capital

In 2021, a number of Belarusian state-owned banks, including the Development Bank of the Republic of Belarus, BelarusBank, BelInvestBank, BelAgroPromBank and AbsolutBank, fell under various packages of sanctions imposed by the United States and the European Union.

According to the National Bank, ruble deposits increased by BYN 566.2 million to BYN 5,098.8 million (up 12.5%), while foreign exchange deposits decreased by USD 674.4 million to USD 3,965.3 million (–14.5%). The inflow of time deposits in rubles and the outflow of FX deposits indicated a greater attractiveness of the former amid inflation and devaluation expectations. The outflow of foreign exchange deposits thus outstripped the inflow of ruble deposits, which suggests population’s decreasing confidence in the banking system against the backdrop of the first sanctions imposed on some Belarusian state-owned banks back in 2020.

In 2021, major deals in the banking market were conditioned by the general political and economic situation: foreign capital was leaving the Belarusian market, being substituted by national or Russian capital. In spring, MTBank, the commercial bank with 100% national capital, purchased Idea Bank stock from Getin Holding S. A. and Getin International S. A. (Poland) for BYN 50 million (about USD 19.6 million at the exchange rate of that time), which was estimated at 42.5% of the bank’s equity, bringing its share to 99.999%.

At the end of the year, Alfa-Bank (99.9% owned by the Russian Alfa Group consortium) acquired 99.98% of FransaBank (owned by Lebanese Fransabank S. A. L. and Fransa Holding S. A. L.) for nearly BYN 27 million (USD 10.6 million), which equaled about half of FransaBank’s equity of BYN 55.62 million (USD 21.80 million). This was done at the second attempt, because, at first, the National Bank vetoed the deal in early 2021, saying that Alfa-Bank did not meet all the requirements for obtaining permission to carry out the transaction.

In terms of equity capital, Economic Newspaper4 rated Belarusian banks in 2021 as follows (see Table 2). The top five remained the same as in 2020.

  2021 2020
Volume Rated Volume Rated
Belarusbank 5,828 1 4,748 1
Belagroprombank 1,850 2 1,821 2
Priorbank 931 3 815 3
Belgazprombank 808 4 739 4
Sberbank 782 5 724 5
Belinvestbank 658 6 584 7
Alfa-Bank 644 7 511 8
BelVEB Bank 631 8 606 6
MTBank 376 9 290 10
VTB Bank 352 10 297 9

Table 2. Top 10 banks in terms of equity capital, BYN million

The second half of the top 10 changed: Belinvestbank and Alfa-Bank moved up from seventh and eighth to the sixth and seventh positions, respectively. BelVEB was down from the sixth to the eighth position. VTB Bank and MTBank, which were ranked ninth and tenth in the previous year, moved up.


The year 2021 was the best year for the Belarusian ruble in its history thanks to the “foreign trade miracle” caused solely by the favorable external environment, rather than Belarusian government or domestic enterprises’ strategies. It was pure luck, actually.

The chance that the miracle will recur in 2022 is slim, and exports will definitely decrease, as sanctions are taking effect. However, the decline in imports associated with that will curb the devaluation of the ruble. The ratio of falling imports and exports will determine the further fundamental dynamics of the ruble: its depreciation and the dollar exchange rate in the range of BYN 4.5-6/USD 1 by the end of 2022 are most likely.

The high probability of foreign exchange shortages may entail tough administrative restrictions, for instance, a ban on the sale of cash and rationing of non-cash FX. In this case, the official exchange rates (and the rates on banks’ listing boards) will be totally irrelevant, while the real exchange rate will be determined by the black market.