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Stanislau Bahdankevich: Belarus’ FX Reserves Make Half Necessary Minimum

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Stanislau Bahdankevich: Belarus’ FX Reserves Make Half Necessary Minimum

While the FX reserves remain at the level of less than $ 12 billion, the default is a real threat to the Belarusian authorities.

Former head of the National Bank of Belarus Stanislau Bahdankevich has said this to the Belarusian Partisan, commenting the regulator’s message on an unexpected increase of the gold reserves at year-end.

We remind, according to the National Bank's information, the foreign exchange reserves for the year rose by 18% on January 1, 2017 and amounted to 4 billion 927,2 million US dollars in the equivalent. The growth of the gold reserves surpassed the prognoses by 2,5 times. The main factors of the growth of the level of foreign exchange reserves was the arrival of two tranches of the financial credit of the Eurasian Fund for Stabilization and Development, and the net purchase of foreign currency from the population.

However, according to Stanislau Bahdankevich, we shouldn’t rejoice with this increase in the gold reserves.

"To date, taking into account the import volume, the need to repay foreign debt, etc, so we must have at least $ 10 billion of foreign reserves. This is a necessary minimum and the optimum amount of the gold reserves would be at $ 12 billion. Now therefore we have half the reserves below the required minimum. So, there is nothing to rejoice. And most importantly - the gold reserves increase was not due to the economic growth, but due to the impoverishment of the population, which is forced to spend all their foreign currency stash, against the backdrop of falling wages, "- Bahdankevich says.

However, this factor will soon exhaust itself, he has said.

"The Belarusians will continue to spend all their savings for a while. However, it will not last long. $ 800 million was withdrawn from the bank accounts in the past year; there is still about $ 7 billion in savings. But this process, I believe, is almost over. It’s the rich who kept their money in the banks. They are not so badly affected. People with small incomes have been actively spending their savings. These people have withdrawn almost everything they had in the banks. Of course, there is still much currency in the hands of the population, in the egg capsules, under the mattress, etc. But in any case, the stagnation will continue, the standard of living will fall and Belarusians will spend less savings. So, the attempt to seriously increase the gold reserves by buying currency from the population will not succeed ", - the former head of the National Bank has said.

The increase of the FX reserves at the expense of foreign borrowing is not the best solution either.

"On the one hand, there is no big threat in the fact that the gold reserves are growing, also through the foreign borrowing. The international loans are long-term and low-interest, but there is a global, systemic problem - how they will be used. If they are aimed at maintaining the existing level of consumption, rather than on the economic recovery, then we do not need such loans. They will only lead to the further impoverishment of the population and create a threat to the entire economy. So I would like that they would give us loans only under the program of structural reforms. Then we will be able to increase the gold reserves with the help of export and investment growth, but not at the expense of debt and impoverishment of the population,"- Bahdankevich has said.

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