Lukashenka Has Problems In Currency Market

The government may start the ruble depreciation.

Possible refusal of Russia to grant credits to Belarus may cause grave economic problems.

Katsyaryna Barnukova, expert of BEROC economic research center, shared her opinion in the interview to Thinktanks.by.

Russia Will Play Trumps

In the end of the last week Reuters reported of new problems in relations between Belarus and Russia. "Russia has suspended new credits for Belarus; since the fourth quarter of 2018 it intends to restrict duty-free supplies of oil products and liquefied gas referring to budget losses," the agency's statement says. It also informs about the blockage of new tranches from the Eurasian Fund For Stabilization and Development and the pause mode in granting the Russian public credit of $1 billion to Belarus. The renewal of credit granting is bound to the ban on export of oil products in Belarus and loss compensation for earlier exported Russian oil products. Commenting on the statement, the Ministry of Finance of Russia stated no pause mode on granting credits to Belarus had occurred. Nevertheless, such scenario may happen in future.

"Technically, Russia cannot influence the issuing of credits by the EFSD. At the same time, it plays the key role there. It is worth remembering that Belarus does not meet conditions on economic reforms, including privatization and corporate restructuring, the issued credit has been aimed at. And it can serve as a lever of influence if Russians want it. Financing on the part of the EFSD can be questioned as well as the new Russian credit for the Belarusian external debt refinancing amounted to $1 billion. It looks like Russia is playing its numerous trumps in the conflict with supplies of Russian oil products. At the time of the gas conflict Russia suspended oil supplies. Now we observe the oil products conflict, and the access to issuing of credits is questionable," Katsyaryna Barnukova said.

Belarus May Face The Necessity To Depreciate Currency

According to the expert, this situation indicates how much Belarus is economically dependent on Russia - our country needs both access to the market of that country and its oil supplies, and also access to Russian granting of credits. "Too many things are linked to Russia. Despite prolonged negotiations with the IMF, Belarus failed to agree upon the credit, which could serve as a safety cushion in case of such situations. The country has preferred to the Russian credit, as it was easier to get it; now we are at risk of facing consequences of our dependence," Katsyaryna Barnukova believes.

Money Belarus gets from the EFSD and Russia is basically spent on refinancing of credits granted earlier. In case of credit suspension, there is a threat of inability of Belarus to service the external debt. "This and the next year we are subject to repayment of huge amounts; and it is basically about repayments to Russia. There was a piece of hope that at least a part of the debt our country would be able to repay, because there were no other sources to raise currency on. Trade surpluses is declining. Import grows stipulated by growing salaries. For several years the National Bank has been buying in large amounts of currency; sooner or later this process will fall given the depreciation of the Belarusian ruble after the Russian one. If we do not find an alternative to refinance our debts, we will have to turn to reserve assets or to depreciate currency to improve the balance of foreign trade," Katsyaryna Barnukova notes.

Absence of the IMF Program Binds Abilities of Belarus

Inability of repayment of external debt is hardly probable. "It's not the time for us to declare the default. Moreover, it will bear additional repercussions. If one credit is declared bankrupt, then eurobonds interest rate increases (conditions for their attraction are not the most profitable). As a result, foreign debt repayments may increase," Katsyaryna Barnukova says.

It's required to differentiate sources of financing in order to avoid grave risks for the Belarusian economy. "In late 2014 there was the situation when Russia refused a credit to support currency rate. So, there should be other sources for borrowing money. The first step has been made - we have issued eurobonds, but this money is borrowed at high price. Our abilities to differentiate sources of financing are bound by absence of the IMF program; investors do not believe that we will carry out a reliable policy line," the expert stresses.

As for meeting foreign liabilities, Katsyaryna Barnukova believes that it is possible only in case of "carrying out of economic and structural reforms, growth of the economic competitive ability, sustainable trade surpluses and creation of attractive conditions for foreign investors."