One good turn certainly deserves another

In accordance with IMF guidance, gold-and-currency reserves in our country were reduced by $334.4m in January, and are thought to have hit $4.724bn in February
In accordance with IMF guidance, gold-and-currency reserves in our country were reduced by $334.4m in January, and are thought to have hit $4.724bn in February. As strategic stock gradually decreases, many have been concerned about our economic stability, despite the National Bank’s assurance. Our country is currently repaying old debts and settling its financial obligations, spending its nest egg. Ideally, we would be generating income from exports but global demand has declined in recent years. Meanwhile, January is always considered to be a ‘dead’ month for sales.

Belarus is under scrutiny from several directions, with critics eager to see if we are capable of repaying our debts. During recent open dialogue with journalists, the President reassured holders of Eurobonds, saying that there was nothing of which to be afraid since our Republic is ready to fulfill its obligations on external state debt in 2015 completely. Money for this purpose has already been set aside in the budget. He noted, “You don’t need to toss away our bonds and sell them cheaply. We aren’t in default or facing default to repay our debts. We’ll give our last money to do so. Anyone with shares who is feeling worried that we have no funds to pay should calm down.” The President added that he hopes to see less borrowing in future, with the country living within its means.

What have our creditors misunderstood? The question is not one of default, since we have enough money to pay our debts. We are due to pay $4bn on old debt this year, and about $1.6bn in 2016. Payments will then fall to under a billion for several years, allowing new borrowing — as is desirable under recent conditions. Currently, Western Europe is mired in a war of sanctions with Russia and is closing its markets, making it more problematic to find a good rate of interest on loans.

The National Bank has not specified which creditors it has in mind but Belarus has begun negotiations on new borrowing, including with the IMF. Meetings with the organisation are due in March and, beforehand, a visit is expected from the President of the European Bank for Reconstruction and Development. Negotiations are being resumed on an old theme and Belarus is still to receive its last tranche of $3bn from the EurAsEC Anti-crisis Fund (as signed with Russia in 2011). Regarding the sum of $500m, soon to be repaid, Mr. Lukashenko notes, “I have solid arrangements with the President and the Prime Minister of Russia; if we have difficulties, Russia will help us, since we are interlinked with the Russian economy.”

The collection of export duties on oil products, and the placement of exchange bonds by the Ministry of Finance on the domestic market of our country, as well as rising gold prices on the international market, should help us to maintain our gold-and-currency reserves at a secure level. Just last year, we repaid about $4bn on loans yet our gold-and-currency reserves decreased by just $1.6bn.

Of course, we’d rather avoid debt but, according to the Ministry of Finance, the situation is not so bad. As of January, 1st, 2015, our country repaid foreign creditors $12.6bn (16.6 percent of our GDP, against the secure threshold indicator of 25 percent). Meanwhile, in serving external and internal state debt, we are currently spending just 5.5 percent of our income: an improvement on early October of last year, when the level stood at 6.7 percent

By Igor Benkovsky
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