Construction of the NPP will be conducted completely under the credit facilities

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April 22, 2016 18:04

Having a high external debt and the vague prospect of its service with meager gold reserves, the Belarusian authorities further aggravate the situation by building a nuclear power plant in the loan, without having even 10% of own funds. Thus, by analogy with the Sberbank,

supervising privatization and credit transactions in the energy sector of Belarus, another major Russian state-owned bank will be financing the nuclear power plant.

Vnesheconombank will credit advance payments of Belarus on nuclear power plant construction in the amount of $ 500 million

It is through Vnesheconombank and the Belarusian \"daughter\" funds of the Russian loan for the construction of nuclear power plants will be held. The entire project to build the nuclear power plant is designed for $10 billion, where the Belarusian side has to pay 10% at their own expense, and 90% - at the expense of the Russian loan. Accordingly, Belarus must find about $ 1 billion, however, the country does not have such money so far, and it searches for new lenders. According to the BVEB Head P. Kallaur, it will be needed about $ 500 million under the contracts to be concluded in the first five years, and it will be provided by his bank. Accordingly, Belarus will not have to take own money from the gold reserves.

Thus, the financing of the ten percent part, which must be paid off by the Belarusian side, will be conducted at the expense of the loan. And so having a high external debt and the vague prospect of its services and payments in scarce gold reserves, Belarus exacerbates the situation by building a nuclear power plant in the loan. It is obvious that the Belarusian authorities are not considering the return period of these loans as close, or not going to give this loan back. In any case, the strategic plan of President Lukashenko, who dismissed the key deputies of P.Prokopovich from the National Bank in 2010, becomes clear. Now BPS-Sberbank and BVEB are the main currency breadwinners to the country, controlling a variety of transactions. The professionalism and quality of NB management have fallen sharply, but it’s is not very important for Alexander Lukashenko. On the other hand, he is absolutely sure of the loyalty of the heads of the major subsidiaries of Russian banks in Belarus.

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Growth in real wages may disrupt macroeconomic balance in Belarus
October 02, 2017 12:12
Фото: Дмитрий Брушко, TUT.BY

The rapid increase in wages has led to a decline in the ratio between labour productivity and real wages to one. Previously, the rule was that enterprises, in which the state owned more than 50% of shares in the founding capital, were not allowed increasing salaries if this ratio was equal to or less than one. The authorities are unlikely to be able to meet the wage growth requirement without long-term consequences for the economy. Hence, the government is likely to contain wage growth for the sake of economic growth.

According to Belstat, In January – August 2017, GDP growth was 1.6%. The economic revival has led to an increase in wages. In August, the average monthly wage was BYN 844.4 or USD 435, i.e. grew by 6.6% since early 2017, adjusted for inflation. This has reduced the ratio between labour productivity and real wages from 1.03 in January 2017 to 1 in the first seven months of 2017. This parameter should not be less than 1, otherwise, the economy starts accumulating imbalances.

The need for faster growth in labour productivity over wage growth was stated in Decree No 744 of July 31st, 2014. The decree enabled wages growth at state organizations and organizations with more than 50% of state-owned shares only if the ratio between growth in labour productivity and wages was higher than 1. Taking into account the state's share in the economy, this rule has had impact on most of the country's key enterprises. In 2013 -2014 wages grew rapidly, which resulted in devaluation in 2014-2015.

Faster wage growth as compared with growth in labour productivity carries a number of risks. Enterprises increase cost of wages, which subsequently leads to a decrease in the competitiveness of products on the domestic and foreign markets. In construction, wholesale, retail trade, and some other industries the growth rate of prime cost in 2017 outpaces the dynamics of revenue growth. This is likely to lead to a decrease in profits and a decrease in investments for further development. Amid wage growth, the population is likely to increase import consumption and reduce currency sales, which would reduce the National Bank's ability to repay foreign and domestic liabilities.

The Belarusian government is facing a dilemma – either to comply with the president’s requirement of a BYN 1000 monthly wage, which could lead to new economic imbalances and could further affect the national currency value, or to suspend the wage growth in order to retain the achieved economic results. That said, the first option bears a greater number of negative consequences for the nomenclature.

Overall, the rapid growth in wages no longer corresponds the pace of economic development. The government is likely to retain the economic growth and retrain further growth in wages. Staff reshuffles are unlikely to follow the failure to meet the wage growth requirement.