Once again, loans are the main way of topping-up trading accounts

The current account surplus, achieved in the first half of 2012, was offset by the performance results in the third quarter. Belarus resumed to foreign borrowing to sustain its current activities at the same level. An alternative would be to sell large SOEs.

On December 7^th the data about Belarus’ balance of payments in Q3 2012 was published.

In the first half of the year, the balance of payments was positive with a USD 704.8 million surplus. This was the maximum positive value since the first half of 2005, when the surplus was USD 870.5 million. In January – September 2012 the deficit of the country’s current account was USD 130.1 million

The main reasons for the country’s current account balance sliding into negative figures was a significant reduction in trade in goods and services and the growth of interest payments on investments and loans. In the first half of 2012 the foreign trade surplus in goods and services was USD 1761 million quarterly, in Q3 2012 it was USD 160.5 million.

The growing deficit in “Primary proceeds” could not be stopped by the record high level of “workers’ wages”. In Q3 Belarusian citizens earned USD 202.2 million working on contracts abroad, which is an absolute record ever since the National Bank started collecting these data.

The reason behind the deficit is the interest payment on Belarus’ loans. Interest payments to service the gross external debt in the past nine months only were USD 973.6 million, which is 6.3% higher than in 2011.

To finance the current account deficit in Q3 2012, Belarus has been using foreign direct investment, trade credits and advances. But these instruments, as a rule, are associated with additional charges for the borrower, and increase the subsequent payments in “Primary proceeds”.

Thus, in Q3 Belarus returned to its previous practices of financing its activities by foreign investment and new loans, despite the significant improvement in the foreign trade and the effect of the devaluation in 2011. An alternative would be the sale of state enterprises. But the Belarusian government is not yet ready to do so.