Country’s gold reserves reach critical level

April 22, 2016 18:00

Belarusian gold reserves risk to become de-facto negative if urgent privatization is not held or loans are not obtained. Therefore Belarus will have to fulfill its obligations, in particular, the three year privatization program worth $ 7.5 billion.

Approximately 74% of the national currency reserves are due the National Bank of Belarus foreign currency debt to commercial banks of the country. On 1 October the GCR of the National Bank of Belarus amounted to USD 4.715 billion, USD 3.5 billion of which is its debt to the banks. The NBB has been using SWAP transactions for a period exceeding 12 months, thereby saving the National gold reserves from drastic decline over the past years (mostly in 2010). The NBB received foreign currency loans from the banks in exchange for the Belarusian rubles on conditions very profitable for the banks. As of 1st September the loss of the National Bank from such operations reached Br 9 trillion. Under the loan agreement with the ACF of the EurAsEC Belarus has to reduce the foreign currency debt to the banks at the expense of prolongation of contracts due to expire.

On 1 October the GCR of the National Bank of Belarus amounted to USD 4.715 billion, USD 3.5 billion of which was its debt to the banks.

Comment

Belarusian gold reserves risk to become de-facto negative if urgent privatization is not held or loans are not obtained.

The National Bank expects to receive a USD 1 billion loan from Russian Sberbank, which will be used to replenish the GCR. Also Belarus hopes to receive the second transaction of USD 440 million from the EurAsEC Anti-Crisis Fund.

Therefore Belarus will have to fulfill its obligations, in particular concerning the three year privatization program worth $ 7.5 billion.

Projected budget revenues this year: USD 2.5 billion from the sale of “Beltransgaz”, from increased public transport tariffs, utility services, etc. It is anticipated that by the end of the year the population will reimburse 30% of the housing services costs and 35-40% next year (currently the population pays about 20.8% of the utilities cost). The government also plans to raise public transport fares, petrol prices, as well as to introduce differential pricing policy on water and electricity consumption.

The government will not be able to continue implementing the existing policies in the long term and a painful shock of structural reforms is yet to come.

However these measures are insufficient and the government will have to continue negotiations with the IMF on a new Stand-by Programme, which will inevitably require implementation of painful reforms in exchange for conditional step-by-step loan transfers.

Therefore the government will not be able to continue implementing the existing policies in the long term and a painful shock of structural reforms is yet to come.

Similar articles

Raising minimum wage in regions to BYN 1000 by late 2019 could prompt devaluation
August 14, 2017 12:02

The country's leadership has instructed the local authorities to raise minimum wages at enterprises by the end of 2019 to BYN 1,000, which would lead to an increase in the average wage in the economy as a whole to BYN 1 500. The pace of wage growth in 2017 is insufficient to ensure payroll at BYN 1000 by late 2017 without manipulating statistical indicators. In order to fulfil the president’s order, the government would have to increase budgetary expenditures on wages in healthcare and education, enterprises – to carry out further layoffs and expand the practice of taking loans to pay wages and restrict investment in modernisation of fixed assets. In 2010, the artificial increase in wages led to a threefold devaluation in 2011, an increase in the average salary to BYN 1500 will not match the capabilities of the economy and would lead to yet another devaluation.