Belarus National Bank includes rubles in forex reserves

MINSK. Sept 1 (Interfax) - Assets in Russian rubles will be included in Belarussian forex reserves, according to the national definition, from September 1, 2006, the Belarussian National Bank's information department said, quoting a resolution from the National Bank board of directors.

The press release notes that according to international standards, reserve currency may be foreign currency from a leading states, used by other states to accumulate liquid international reserve assets, make international settlements and cover foreign obligations and to carry out currency intervention, accepted as payment throughout the world.

The National Bank said that from July 1, 2006 Russia removed all currency restrictions, which moved the Russian ruble significantly closer being a freely convertible currency. In addition, in recent years the sovereign rating of the Russian Federation has increased significantly," the National Bank said.

The Russian ruble accounts for about 20%-30% of total volume on the Belarussian domestic currency market and in foreign trade settlements, second only to the dollar, the press release said.

Also, as world confidence in the Russian ruble grows and its use in international settlements increases, the National Bank plans to increase the weight of the Russian ruble in the structure of reserve currencies. At the moment the National Bank has two methods for calculating international reserve assets - the IMF method, and the national definition.

According to the IMF method, international reserves assets on August 22 amounted to $1.114 billion, down 14.1% since the start of the year. According to the national definition, reserves amounted to $1.515 billion, down 4.4% from the start of the year.

The Central Bank hailed the Belarussian National Bank's move to include assets in Russian rubles in the gold and forex reserves.

"This is definitely good news. It could be seen as one of the first results of currency liberalization," CB Deputy Chairman Konstantin Korischenko told Interfax.

The news will not have a significant impact on the macroeconomic situation in Russia and is more psychological in nature, Korischenko said.

Even so, the decision might ease inflationary pressure on the ruble, he said.

"Any additional demand for rubles helps to ease the inflationary impact of issuing money. In this sense the decision has a certain if not very great effect for the Russian economy," he said.

On the other hand, Korischenko said he did not expect the decision to include ruble assets in the Belarussian gold and forex reserves would further strengthen the Russian currency.

"This could serve to strengthen the ruble's exchange rate only if the rubles assets are formed not simply by rubles entering the Belarussian economy but by converting some of the reserves in a different currency into rubles," he said.

The Belarussian National bank's decision reflects the objective situation emerging in the Belarussian economy, Korischenko said.

"There's a certain logic when a currency becomes a reserve currency -that which is used actively in the financial and banking sector. If the ruble is used actively, as a means of payment, then it is destined to become a reserve currency sooner or later," Korischenko said.