**LIBERALIZATION OF CURRENCY EXCHANGE**
** **
JANUARY 3, 2000
 
FM AMEMBASSY MINSK
 
1. THE NATIONAL BANK OF BELARUS RECENTLY
 LIBERALIZED SOME SEGMENTS OF THECURRENCY EXCHANGE
 MARKET AND HAS PLEDGED TO CONVERGEEXISTING MULTIPLE
 EXCHANGE RATES INTO A SINGLE ONE INLATE 2000.
 DESTRUCTIVE ECONOMIC POLICIESCONDUCTED BY THE
 GOVERNMENT OF BELARUS OVER THE LASTFEW YEARS HAVE
 MADE IT IMPOSSIBLE TO LEGALLY PURCHASECASH AND NON‑
 CASH HARD CURRENCY IN BELARUS AND HAVELEAD TO THE
 EMERGENCE OF A LARGE UNOFFICIAL (BLACKMARKET)
 CURRENCY MARKET.  THE OIFFERENCEBETWEEN OFFICIAL AND
 BLACK MARKET RATES HAS BEEN TWO, ATTIMES, THREE FOLD.
 THIS MOST RECENT CURRENCYLIBERALIZATION IS ONLY A
 HALF STEP, AND MANY RESTRICTIONSREMAIN IN PLACE.
 
 
 2. ACQUIRING HARD CURRENCY IN BELARUSHAS BEEN
 DIFFICULT FOR MOST BELARUSIAN CITIZENSAND BUSINESSES
 SINCE 1997.  ADOPTING A HIGHLYUNPRODUCTIVE AND
 "SOVIET" STYLE OF RULING THE ECONOMY,THE GOVERNMENT
 NATIONALIZED THE INTER‑BANKCURRENCY EXCHANGE IN
 FEBRUARY, 1997 AND DESTROYEO THENATURAL DEMAND/SUPPLY
 RATIO.  MULTIPLE EXCHANGE RATES(OFFICIAL, BLACK
 MARKET CASH, BLACK MARKETNON‑CASH) EMERGED ALMOST
 IMMEDIATELY. THIS PROVED TO BEDAMAGING FOR THE ENTIRE
 ECONOMY.  FOR EXAMPLE, THE LATEDECEMBER OFFICIAL RATE
 OF EXCHANGE WAS ONE USD TO 320,000BELARUSIAN RUBLES
 WHILE THE BLACK MARKET OFFERED 740,000‑ 750,000 FOR
 ONE USD.  MOST CURRENCY WASEXCHANGED ON THE BLACK
 MARKET AND SEVERELY DEPLETED THEGOVERNMENT'S RESERVES
 OF HARD CURRENCY.  TO COUNTER THESIZE AND ROLE OF THE
 BLACK MARKET, TO DATE, THE GOVERNMENTHAS RESORTEO TO
 EXCLUSIVELY PUNITIVE MEASURES AGAINSTTHOSE WHO
 ENGAGEO IN BLACK MARKET CASHACTIVITIES.  E.G. WHEN
 DETECTED, ALLUNDER‑THE‑TABLE CASH AND NON‑CASH
 OEALINGS WERE SUBJECT TO COURTHEARINGS AND LARGE
 FINES.  THE REPRISALS, HOWEVER,SEEM TO HAVE PROVED
 COMPLETELY FRUITLESS IN REDUCING THESCOPE OF BLACK
 MARKET ACTIVITIES.
 
3. AS A PART OF ITS NEW MONETARY ANDEXCHANGE POLICY
 FOR THE LAST QUARTER OF 1999 AND THEYEAR 2000, THE
 NATIONAL BANK OF BELARUS HAS:
 ‑‑COMPLETELY LIBERALIZEDSELLING/BUYING OF HARD
 CURRENCY CASH;
 ‑‑EXEMPTED BELARUSIANCOMMERCIAL BANKS FROM OBLIGATORY
 SELLING OF HARD CURRENCY CASH (BOUGHTTHROUGH EXCHANGE
 KIOSKS ON THE STREET) TO THE NATIONALBANK;
 ‑‑LIFTED ALL RESTRICTIONSON THE VOLUME OF HARD
 CURRENCY BOUGHT/SOLD AMONG BELARUSIANBANKS.
 
 THESE MEASURES HAVE ENABLEDBELARUSIANS TO FREELY
 EXCHANGE CURRENCY AT BANKS AND OTHERCURRENCY
 EXCHANGES.  THE BANK RATES OFEXCHANGE ARE NOW WITHIN
 40,000 RUBLES OF THE BLACKMARKET.  THE RECENT
 LIBERALIZATION OF EXCHANGE, HOWEVER,HAS NOT
 ELIMINATED THE PRESENCE OF THE BLACKMARKET FOR
 CURRENCY.
 
 4. IN ADDITION, BELARUSIAN EXPORTERSARE STILL OBLIGED
 TO SELL THIRTY PERCENT OF THEIR HARDCURRENCY REVENUES
 AT THE OFFICIAL RATE, THUS LOSING MORETHAN FIFTY
 PERCENT OF THEIR REVENUE IN BELARUSIANRUBLES.
 EXPORTERS ALSO HAVE TO SELL ANOTHERTEN PERCENT OF
 THEIR HARO CURRENCY REVENUES AT ARATE, WHICH,
 ALTHOUGH VERY CLOSE TO THE MARKET ONE,IS STILL BEING
 OICTATED BY THE NATIONAL BANK. FINALLY, THE EXCHANGE
 RATE OF CURRENCY TRANSACTIONS AMONGBELARUSIAN BANKS
 IS ALSO BEING ESTABLISHED BY THENATIONAL BANK (OVER
 THE PHONE) ON A DAILY BASIS.  ALLTHIS PRESERVES THE
 EXISTING SYSTEM OF DOUBLE OR EVENTRIPLE BOOKKEEPING
 THAT ALL BELARUSIAN BANKS ANDBUSINESSES STILL HAVE TO
 UTILIZE.  THE NATIONAL BANK HASCOMMITTED ITSELF TO
 FURTHER LIBERALIZE ITS EXCHANGEPOLICY, HOPING TO
 REACH A SINGLE RATE IN THE SECOND HALFOF THE YEAR
 2000.