Belarus Repays Obligations in Foreign Currency Ahead of Schedule
According to a source in the state administration, JSC “Belaruskali\" will make an early repayment of the loan to Savings Bank of Russia in the amount of USD 1 billion. On November 18, 2011 in Minsk, the Savings Bank of Russia and the Eurasian Development Bank (EDB) signed an agreement on the provision of a syndicated loan for \"Belaruskali\" of USD 1 billion total. The share of the Savings Bank amounts to USD 900 million.
The total sum of the loan was transferred to the account of \"Belaruskali\" in JSC \"BPS-Savings.\" After that, the sum of the loan equaling USD 800 million was added to Belarus’ gold and foreign currency reserves.
In March 2012, the Group of the Savings Bank of Russia suggested the Belarusian government to refinance the credit. However, the terms of refinancing did not satisfy the Belarusian side due to a high interest rate on the loan.
The National Bank, in its turn, fulfilled the obligations to the Belarusian banks worth more than USD 400 million within the frameworks of transactions with deposits in April ahead of schedule.
The main donor to the Belarusian National Bank was the Belvnesheconombank to whom the NBB has fully paid off its debt.
For reference. As of April 1, 2012, the National Bank’s obligations in foreign currency to the banking sector amounted to USD 4, 51 billion.
In the situation when the demand for ruble loans is declining (due to the high interest rates), it is more profitable for the Belarusian banks to close the transaction on the exchange deposits with the central bank, i.e. to receive foreign currency back, by paying the National Bank its ruble equivalent. Consequently, the released foreign currency might be used to provide new lending to enterprises. It is now prohibited by law to provide loans in foreign currency to residents of Belarus.
However, to revitalize the ruble lending the National Bank continues to gradually reduce the refinancing rate. So, from May 16, 2012 the refinancing rate is to be reduced by 2 percentage points to 34% per annum. The upper limit of interest rates on liquidity support operations of the banking system is to be decreased from 60% to 55%. The refinancing rate on operations on the withdrawal of liquidity is to be reduced from 23% to 20% per annum. In fact, the National Bank is now a market maker in the country’s money market. It regulates the basic interest rates of financial market operations by using standard short-term withdrawal of ruble liquidity (overnight deposits, short-term bonds). So, as of May 11, the National Bank has withdrawn from the banking system 8.24 trillion rub., which is about USD 1, 019 billion. This is a significant number, even according to the Belarusian standards. The National Bank is forced to withdraw the excessive short-term ruble liquidity from the banking sector in order to reduce pressure on the exchange rate of Belarusian ruble on the domestic foreign exchange market.
It should be emphasized that the repayment of the country and Central Bank’s obligations in foreign currency ahead of schedule will facilitate the debt burden of servicing the foreign debt nominated in foreign currency. Moreover, some improvement in terms of raising funds in international financial markets for the residents of Belarus might be expected.
It can also be added that as political tensions between Belarus and the EU reduce, there is a slight decrease in yield on Belarus’ two Eurobond issues. According to Bloomberg, May 11, 2012 the first issue of Belarus’ Eurobond maturing August 3, 2015, traded at a yield of 10.487% (bid), and 9.951% (ask), the second issue maturing January 26, 2018 - 10.38% (bid), and 10.119% (ask). If the yields on sovereign bonds fall below 9%, the Belarusian government may start preparing the placement of new bond issues.
Over the past year, military-political relations between Minsk and Kyiv have become complicated. Due to their high inertia and peculiarities, this downward trend would be extremely difficult to overcome.
The root cause of the crisis is the absence of a common political agenda in the Belarusian-Ukrainian relations. Minsk is looking for a market for Belarusian exports in Ukraine and offers its services as a negotiation platform for the settlement of the Russo-Ukrainian war, thereby hoping to avoid political issues in the dialogue with Kiev. Meanwhile, Ukraine is hoping for political support from Minsk in the confrontation with Moscow. In addition, Ukraine’s integration with NATO presupposes her common position with the Alliance in relation to Belarus. The NATO leadership regards the Belarusian Armed Forces as an integral part of the Russian military machine in the western strategic front (the Baltic states and Poland). In addition, the ongoing military reform in Ukraine envisages a reduction in the number of generals and the domestic political struggle makes some Ukrainian top military leaders targets in politically motivated attacks.
Hence, the criticism of Belarus coming from Ukrainian military leadership is dictated primarily by internal and external political considerations, as well as by the need to protect the interests of generals, and only then by facts.
For instance, initially, the Ukrainian military leadership made statements about 100,000 Russian servicemen allegedly taking part in the Russo-Belarusian military drill West-2017. Then the exercises were labelled quazi-open and military observers from Ukraine refused to provide their assessment, which caused a negative reaction in Minsk. Further, without citing specific facts, it was stated that Russia was building up its military presence in Belarus.
Apparently, the Belarusian and Ukrainian Defence Ministries have entangled in a confrontational spiral (on the level of rhetoric). Moreover, only a small part of the overly hidden process has been disclosed. That said, third states are very likely to take advantage of the situation (or have already done so). This is not only about Russia.
The Belarusian Defence Ministry officials are restrained in assessing their Ukrainian counterparts. However, such a restraint is not enough. Current military-political relations between Belarus and Ukraine are unlikely to stabilise without the intervention of both presidents.