‘Pin-point’ privatisation may become one of the ways for balance of payments recovery

The government of Belarus intends to include the target revenue of USD 4 bln from privatisation in the forecast of socio-economic development for the year 2014.

If the government does not receive huge loans of at least USD 2.5 bln next year (or does not find a ‘hole’ in the Customs union for the same amount of the annual income), the probability of meeting 2014 privatisation plans of the government rises significantly. Still, this does not mean a shift towards structural reforms of the economy – these might be pin-point sales to cover the ‘cash gap’.

After the abolition of ‘privatisation lists’ by the decision of president Lukashenko in March 2012, privatisation virtually came to a hault. The government continued to adopt plans on the income from privatisation, and conditions of a stabilisation credit of the EURASEC Anti-crisis fund included an annual sale of public entities for the minimum amount of USD 2.5 bln, yet in reality no deals were made. In 2012 ‘receipts from privatisation’ amounted to as little as USD 3.2 mln, and zero receipts this year.

This situation reflects the obvious lack of interest on behalf of the Belarusian authorities to reduce state control and influence in economy. Considerable resources spent on various forms of assistance to the ineffective state sector are not considered losses for the economy, not mentioning the lost profit. Still, there are reasons to believe that 2014 privatisation plans will be fulfilled at least partially. The plans define specific transactions and the deal partners were defined at least 5 years ago.

Unfavourable external economic conditions accompanied by the growing costs of servicing the foreign debt may break the deadlock in privatisation process. The costs will constitute about USD 3.1 bln in 2014. The foreign debt may reach USD 17 bn (22.7% of GDP) while gross foreign debt – USD 41.5 bn (55.3% of GDP) by the end of 2013. Still, if the government manages to loan up, privatisation will be postponed yet again.

Russian companies are still the most probable investors in Belarusian economy. Their list is well-known for a long time: ‘Gazprom’ is ready to buy ‘Grodno-Azot’ under certain conditions, ‘Yevrokhim’ – the Gomel chemical plant, ‘Rosneft’ and ‘Lukoil’ – ‘Naftan’, KamAz – MAZ, ‘Rostekhnologii’ – the Minsk factory of wheeled tractors.

Since the government has not defined sources of new external loans, the probability of fulfilling privatisation plans scheduled for 2014 is relatively high. Still, possible pin-point sales will not mean the beginning of systemic privatization. Following sales of individual assets to the most impatient Russian partners, the privatisation process will most probably stop again. Until the next phase of the aggravation of the financial deficit.