Devaluation on cards, poor economic model to blame
On November 6th, the National Bank published the latest data on Belarus’ international reserves.
Belarus is rapidly approaching devaluation: in October, international reserves were the lowest since 2011. While selling off assets may keep devaluation at bay, it will not address the root cause, i.e. an inefficient economic model.
As of November 1st, Belarus’ international reserves were USD 6.8131 billion, a decrease since October by USD 574.6 million. In October, public debt repayment in 2013 peaked. Belarus repaid more than USD 260 million to the IMF on the principal loan, as well as other liabilities. The domestic foreign exchange market was a net buyer of foreign currency, which has led to a substantial decrease in gold reserves.
Belarus’ gold reserves were lower than in October 2013 only three times before: in June 2009, December 2010 and January 2011. In 2011, the drop in the international reserves resulted in the Belarusian ruble devaluing by 300%. The current level of international reserves is worth around 1.7 months of imports. In December the demand from individuals and corporations for foreign currency is likely to increase due to Christmas and New Year celebrations. Around the same time, Belarus is anticipating the fourth and the last tranche (USD 440 million) from EurAsEC ACF, but its disbursement might be delayed depending on the situation with the Baumgertner case (CEO of the Russian potash company, Uralkali).
Belarus may avoid devaluation only if it starts selling its assets and spending the proceeds on servicing the public debt and the population’s growing needs. However, only profitable Belarusian assets are of any interest to investors, and if they are sold, Belarus’ budget revenues will drop and the need to devalue BYR will arise once again.
The problem is rooted in Belarus’ economic model which is based on rigid centralized management, consumerist approach to foreign investment, corruption and fear of economic reforms, misappropriation of available funds, bureaucratized decision-making and the lack of real interest from international investors. Belarus is not yet sure if it can count on Russia’s support, and without it Belarus might go bankrupt overnight.
Belarus faces the devaluation of the Belarusian ruble in the near future. The vicious circle might be broken only if Belarus reforms its management structure.
The Belarusian authorities regard the Catholic conference as yet another international event to promote Minsk as a global negotiating platform. Minsk’s proposal to organise a meeting between the Roman-Catholic Church and the Russian Orthodox Church is rather an image-making undertaking than a serious intention. However, the authorities could somewhat extend the opportunities for the Roman-Catholic Church in Belarus due to developing contacts with the Catholic world.
Minsk is attempting to lay out a mosaic from various international religious, political and sportive events to shape a positive image of Belarus for promoting the Helsinki 2.0 idea.
Belarus’ invitation to the head of the Holy See for a meeting with the Patriarch of the Russian Orthodox Church should be regarded as a continuation of her foreign policy efforts in shaping Minsk’s peacekeeping image and enhancing Belarus’ international weight. The Belarusian authorities are aware that their initiative is unlikely to find supporters among the leadership of the Russian Orthodox Church in Moscow. In Russia, isolationist sentiments prevail.
In addition, for domestic audiences, the authorities make up for the lack of tangible economic growth with demonstrations of growth in Minsk’s authority at international level through providing a platform for religious, sportive and other dialogues.