The National Bank needs additional USD10 billion by 2015 to secure treasury

The goal to replenish foreign reserves up to USD 18 billion by 2015 is rather unrealistic. The main obstacles are: the need to repay external public debt, negative trade balance (without taking into account Russian oil re-exports) and curbing privatization. The sale of Belaruskali could however solve the problem.

To fulfill the socio-economic development plans by 2015, Belarus has to replenish treasury up to USD 18 billion, which is the amount of three months imports of goods and services.

The goal is envisaged to be achieved via implementation of two tasks. First task is to reach a positive foreign trade balance, taking into account the projected amount of duty payments for exported petroleum products – USD 3.9 billion. Second task is to attract foreign direct investment worth USD 4.5 billion net. The National Bank also recons on USD 880 million from the EurAsEC Anti-Crisis Fund.

The positive trade balance in the first half of 2012 should not be misleading. Rough calculations show that Belarus could generate additional income of about USD 250 million per month using semi-legal export schemes with solvents and lubricants. If these schemes are stopped and Belarus pays all duties due for oil products supply, foreign trade balance will become negative again. Belarus can only recon on increased delivery costs of potash fertilizers. Looking at the situation in the food markets, it is possible, but potash fertilizers sales will not replace all lost income from solvents and lubricants exports.

Belarus’ major hope is to attract USD 4.5 billion from foreign direct investment and it is not a coincidence. Next year’s foreign public debt payments exceed USD4 billion and it is not feasible to repay them from the SDR 1.2 billion IMF loan, as the government fails to fulfill the IMF recommendations and continues raising salaries. Moreover, the political situation is not favourable for the IMF to take a positive decision regarding new loan progarmme for Belarus.

Belarus has never been able to attract such high amounts from investments. This is due to the fact that privatization conditions are often onerous and potential investors are regarded as sponsors. This approach significantly narrows the range of applicants seeking to buy Belarusian companies. The largest privatization deal in Belarus (sale of Beltransgaz) had two stages and lasted several years. In the meanwhile, in order to fulfill the plans with foreign reserves, Belarus needs to double the FDI amount received last year.

Theoretically, the projected level of foreign reserves could be achieved by 2015, but only if a major privatization deal takes place or a large-scale privatization starts, which is extremely unlikely.