When the Sale of Gold Reserves Starts?

Insane decisions of the authorities bring default closer.

In 2016 gold reserves of Belarus, according to the National Bank, increased by a tonne only.

- It was increased not by production growth, but it cost us foreign currency, former head of the National Bank of Belarus Stanislau Bahdankevich says in an interview to Zautra Tvaye Krainy. - When reserves are not enough, it was not a wise step to spend currency to buy gold.

According to the Professor, the sale of gold requires time. And it implies additional costs - the search for buyers.

The expert recalls that the Belarusian Treasury lacks dollars, and this year $5 billion are subject to payments for credits.

Foreign Reserves (FR) now equal to $5 billion.

- And it is gold. The country that lacks FR, it is wiser to keep them in hard currency, Doctor of Economics stresses.

He noted that Belarus must have at least $10 billion in reserve to avoid default and pay off foreign loans, as well as for emergencies in the economy.

- Perhaps, our monetary authorities believe that we are rich and keep reserves on gold, Stanislau Bahdankevich wonders.

- Do the authorities rely on gold due to its stable price?

- Everything drops in price including gold. But dollar is more flexible. If something is subject to emergency payment, dollars are always at hand and there is no need to pay high penalties. Gold may devalue at a smaller extent, but it is not a liquid product. It's useful to keep value. When I was on job training in Paris and London, leaders of banks of Latvia and Lithuania constantly dropped into Financial Ministries of France and Great Britain, places they kept their public gold. The leadership of these Baltic countries withdrew their reserves there as soon as they felt the threat of Soviet occupation in the 40s of the last century. When Latvia and Lithuania became independent, France and the United Kingdom gave them gold reserves of the same value back.

- May the Belarusian authorities turn to sales of gold reserves to pay debts?

- Most likely public enterprises will be sold first, gold is the mean against panic in a monetary sphere. For example, shares of refineries, Belaruskali may be sold. The authorities have a piece of hope for additional loans from the Eurasian Fund for Stabilization and Development controlled by Russia and money of the IMF.

But it is unknown whether eastern ally allocates money. The West will allocate credits only if the government launches implementation of the global programme of economic transformations.

- How much time is left before the default?

- The government continues negotiations with the EFSD. We have received less than a half of $2 billion loan. There is a chance to get this money, the IMF does not put forward demands. It only requires strict implementation of the agreement. In negotiating with the IMF, in my opinion, the personal position of Lukashenka is the brake.

The government, as soon as I know, agrees with the IMF's requirement. Their implementation would be wise, reasonable and useful step. I mean the requirement to promote economic efficiency, create a favorable climate for investments and development of the private sector. But, instead of, for example, tax reduction, the authorities got into a mess with "spongers".

Such insane decisions hurt the Belarusian economy and the image of the country.