Country’s gold reserves reach critical level

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 1^st 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.