Economist: Lukashenka Has No Free Money For Debt Repayment

It’s not exactly a default yet, but the situation is serious.

The Ministry of Finance of Belarus declares that with the involvement of the Russian state loan for $ 600 million, problems have arisen, although, according to Minister Maksim Yermalovich, “Belarus has fulfilled all the conditions,” writes “Your Country’s Tomorrow”.

Can we do without the Russian money?

Recently, the Russian Prime Minister and the Finance Minister of the neighboring country reiterated several times that funding issues, like discussion of tax maneuver compensation, will be linked to progress in closer bilateral integration, said Alpari senior analyst Vadzim Iasub.

- What will happen if we do not receive this money this year?

- Our budget has been drawn up on the basis that we will receive this money. In fact, it has already been distributed and should have gone for a return of debts. What options do we have? For example, get a loan from China. If we assume that there is no alternative, this year we will pay our debts, we will simply end the year with the volume of gold and foreign currency reserves by $ 800 million less than planned. And at the end of the year it will be not 7.1 billion dollars, but 6.3 billion dollars.

We are not talking about the fact that a default will happen without this money, but it’s better to get it than not to get it at all. There is always the most extreme option, in the worst case - a loan from the International Monetary Fund.

- If the authorities do not want to use gold reserves to pay off debts, can they find funds for this domestically?

- There is no money inside the country. Free money that can be spent on debt repayment is gold reserves. It should be understood that this is not a fixed value, since the fund is constantly spent on debt repayment. On the other hand, it is regularly replenished when the state, personified by the National Bank or the Ministry of Finance, places foreign currency bonds. It is also replenished by export duties on oil and petroleum products, and even when the net sale of currency occurs on the foreign exchange market. The National Bank buys it and replenishes the gold reserves. So there is a constant dynamic. The purchase of currency in the market is not guaranteed; it takes place under a favorable situation in the foreign exchange market, when in total enterprises and the population hand over currencies more than they buy.

- How long will the population be able to supply the state with currency?

- For a long time, the population has been losing currency. This is due to the fact that the growth of income of Belarusians remains quite restrained. In addition, it is now more profitable to keep money in ruble deposits than in currency deposits. In the foreseeable future, the population will remain a net seller of currency, but the volume of this sale will float, it is not guaranteed.

- Is the Belarusian leadership going to seriously react to the fact that Russia does not give the requested and promised money?

- There is a fairly strong mutual coordination of economic and political issues, and this is very bad. And here it is not necessary, perhaps, to take offense with the Russian Minister of Finance, since in Russia it is not a question of his competence: whether to give money to Belarus or not is decided at the level of the president. Quite often over the past 20 years, political tensions between the leadership of Belarus and Russia have resulted in economic problems. There were questions about the price of oil, gas, meat and milk supplies.

Russia wants to get something “tangible” for helping Belarus - this is closer integration, but both the Russian and the Belarusian leaderships stubbornly conceal the details of what is meant by this.