Critically low level of gold reserves may prompt Belarus to reforms

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April 22, 2016 19:39

In 2015, Belarus’ gold reserves dwindled by USD 0.9 billion. The gold reserves have shrunk due to the unfavourable foreign market situation for Belarusian goods and net foreign currency purchases by private and legal persons on the domestic market. In the absence of secured loans, Belarus decided to reform the social sphere in order aspire to an IMF loan, which could lead to further economic reforms in Belarus.

According to the National Bank, on January 1st, 2016, Belarus’ international reserves totalled USD 4.175 billion, i.e. shrank by USD 883.2 million in 2015. In December 2015 alone, the international reserves decreased by USD 408.1 million. In order to repay its domestic and external commitments, the National Bank in December 2015 raised USD 834.5 million and EUR 25 million on the domestic market from foreign currency bonds. Otherwise, the international reserves could drop below USD 3.5 billion, which could exacerbate the negative trends on the foreign exchange market.

The reserves have languished due to the deteriorating foreign trade situation and changing trends on the domestic foreign exchange market. In January – November 2015, foreign trade deficit totalled USD 2.8 billion (USD 740 million in November alone). In late 2015, exports decreased due to lower sales of potash fertilizers, oil products, and the negative impact on exports of the National Bank’s exchange rate policy. The National Bank strengthened the Belarusian rouble against the Russian rouble and Belarusian goods had lost their competitive advantage on the Russian market. On the domestic foreign exchange market, private and legal persons have become net buyers of the foreign currency. In addition, the National Banks’ initiative on the deposit market has led to a partial withdrawal of foreign currency savings from the Belarusian banking system.

At all rates, the only option for preserving the level of international reserves remain foreign loans. The agreement with the EFSR for a USD 2 billion loan has not yet been reached. The agreement with the IMF has not been concluded due to disagreements over terms of social reforms. In late 2015 – early 2016, the authorities have undertaken some measures aimed at overcoming obstacles in negotiations. For instance, they have increased electricity and gas tariffs by 20%, and plan to recover up to 80 % of housing and communal services costs (now subsidised by 65%) and extend service record requirement from 15 to 20 years for old-age pension by 2026. In addition, there are talks about a national referendum on rising the retirement age. That said, other measures could be adopted in order to meet the IMF requirements as understood by the government. Once the loan agreement is reached, reforms may continue in other economic sectors in order to help Belarus to overcome the cyclical crisis the country has fallen into thanks to the current socio-economic model.

Overall, in 2015 Belarus could not keep gold reserves needed to meet her external and domestic liabilities, intact. In the absence of domestic remedies to stabilise the currency market situation, the government may implement the IMF requirements in order to remove contradictions in negotiations over a new loan, which, in turn, may lead to economic reforms in Belarus.

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Belarusian and Ukrainian Defence Ministries entangle in confrontation spiral
October 02, 2017 11:57
Фото: RFRM

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.

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