Current accounts situation in Belarus is critical
On October 1st, new requirements regarding foreign currency loans to enterprises were introduced.
Belarusian companies cannot operate without loans. Interest rates on Belarusian ruble loans are very high, and foreign currency loans have been a good source of cash for current operations. If currency loans become less available, Belarusian payment system might be paralyzed.
The situation with payments in Belarus is critical. As of September 1st, 2013, the companies’ debt for the supplied raw materials, goods and equipment was USD 24.7 billion, or 55 % of the overall production output in January - August 2013. 10% of these debts are overdue. In addition, products’ supplies are often considerably delayed and often paid for a year after the delivery. Belarus’ production survives on loans, since companies’ net profits have fallen by more than 30% compared with 2012. More than a half of enterprises lack working capital.
Within state support programmes, interest rates on BYR loans are circa 30 % per annum. The share of Belarus’ enterprises with profitability higher than 30% is 3.2 %. Interest rates on BYR loans are closer to 50% per annum. Businesses have found a way out by using foreign currency loans, which they sell at the stock market to get BYR. Such practices have substantially increased currency risks for the banking system as well as for industry. As a result, the National Bank issued a resolution No 353 on June 10th, 2013, which entered into force on October 1st 2013. The resolution has increased the regulatory capital requirements for banks in order to cover credit risks on foreign currency debt. Ahead of the rules’ change, in September Belarusian companies have obtained a record high amount of foreign currency loans – USD 490.8 million.
As of October 2013, interest rates on foreign currency loans will increase and loans’ volume will decrease. The situation with the interest rates on ruble loans is deteriorating - banks, fearing the outflow of ruble deposits, offer interest rates to the population at 50 % per annum, therefore interest rates on loans start at 55 % per annum and higher. Against the background of growing overdue payment debts, reduced lending to the economy might create a chain of defaults, which would affect entire economy of Belarus. Moreover, the crisis with payments will start affecting prosperous businesses too.
Due to unrealistic production plans, the government has once again created a financial problem for enterprises. Tighter lending to the economy might entail a surge in defaults at enterprises, which they will have to overcome by using barter or similar operations.