Financial Stability

The Financial Stress Index (FSI) of Belarus slightly decreased in Quarter 1 of 2022 (see Table 1). This is due to the fact that the results of the quarter were largely shaped in the pre-war situation fol-lowed by inertia. The key factor that influenced the decrease in the FSI value in Q1 2022 was the improved Banking Sector Fragility (BSF). Nevertheless, the overall index value was in the range of positive values, which characterizes an increased financial stress. The risks associated with Rus-sia's invasion of Ukraine and the expanding sanctions background make it inevitable for the finan-cial system stress to keep elevating in Belarus. The FSI growth potential is primarily associated with the External Debt to Foreign Reserves (ED/FR) component. At the same time, the probability of a trend change and a decreased stability of the banking sector in subsequent periods is extremely high.