No possibilities to refinance the IMF loan, hopes for EurAsEC Anti-Crisis Fund
An IMF mission will be working in Minsk from 18 October until October 2012 to conduct the third post-program monitoring.
In 2013, Belarus will have to repay about USD 2.9 billion in foreign debt settlement. Major repayment will be addressed to the IMF. This debt is not subject to refinancing, while according to IMF estimations, the current account balance in 2013 will not allow Belarus to refinance it independently.
On October 9-13, the Belarusian delegation participated in the annual session of the Council of the Executives of the World Bank and the International Monetary Fund. After the meeting, the Ministry of Economy announced that cooperation with IMF would only be limited to consulting on technical support for Belarus. No new loan program is planned.
According to IMF forecasts for 2013, Belarus’ current account balance will be negative and will account for 5.8% of the GDP. In this situation, Belarus will not manage to independently refinance a debt of USD 2.9 billion.
Belarus has made efforts to refinance the foreign debt through borrowing from the domestic market. The first transaction on Belarus foreign currency bonds amounting to USD 100 million was carried out by Bank BelVEB. On October 17, it announced that it invites egal entities to invest in foreign currency bonds for a period of 3,5 years in the amount of USD 150 million. The potential investors can offer their own rates and the Ministry of Finance will choose the most competitive offer. In these conditions, the remaining tranches of the loan from EurAsEC Anti-Crisis Fund are the largest and most likely resources to refinance the existing debt.
However, obligation of the Belarusian side stated in the letter of intent will not be performed to the full. Most crucially, it needs to fulfill an obligation to sell state assets of USD 2.5 billion by the end of 2012. Currently, there is no single realistic transaction which would account for fulfilling this obligation. In this regard, allocation of new tranches of the loan is not evident and will most likely be postponed, since growth of pressure in the foreign exchange market will force Belarus to take a more active stance in negotiations on certain assets.
Thus, in the situation when the Belarusian authorities have limited external foreign currency earnings and are pressed to repay foreign debt, they will have to make concessions regarding terms and conditions for privatization of state-owned property by Russian investors. Otherwise, the tranches of the EurAsEC Anti-Crisis Fund loan will be postponed for an uncertain term.
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.