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Belarusian National Bank Squandered Foreign Exchange Reserves

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Belarusian National Bank Squandered Foreign Exchange Reserves

The authorities' financial report is thought-provoking.

The banki24.by website assessed the financial situation in Belarus, what actually happened, and what the situation is at the beginning of 2021.

The NBRB reported that, in December, Belarus' reserve assets increased by USD 92.1 million. Most of the journalists chose to reprint the regulator's press release and not dig deeper. But there is something to pay attention to.

The first feature of the National Bank's communication in the new year is the lack of information about the state of the domestic foreign exchange market. In previous months, the NBRB tried to ensure that data on the gold reserves and the foreign exchange market was released on the same day. It is thought-provoking.

As detailed data on reserves show, reflection is quite appropriate here. Compare: in November 2020, gold and foreign exchange reserves as a whole fell by USD 109.2 million, but the value of monetary gold in reserves decreased by USD 146.3 million. This means that the foreign exchange portion of the authorities' reserves has grown.

A relatively good disposition for the National Bank in November is confirmed by data from the domestic foreign exchange market. There, the NBRB acted as a net buyer of foreign exchange. By the way, in September and October, the authorities were also net buyers.

But the January press release does not contain any mention of buying currency from exchange trading. It provides only general explanations for 2020, without splitting into months.

According to our estimates, the absence of any mention of buying foreign currency in December is explained by the fact that the National Bank again turned into a net seller at the end of the year. Even without having at hand data from the foreign exchange market, it can be determined by the dynamics of the components of reserves.

Look: gold and foreign exchange reserves increased by USD 92.1 million, but the cost of gold in reserves increased by USD 206 million. In relative terms, gold in reserves rose 7.3% over the month.

If we compare the data on gold in the gold reserves with world quotations, it turns out that the entire rise in the cost of gold is associated with an increase in gold prices. In other words, the authorities did not take part in the growth - they were just lucky with the gold market conjuncture.

The foreign exchange part of the reserves of Belarus decreased in December. Over the month, the balances of reserve assets in foreign currency fell by USD 15 million, while other assets decreased by USD 104.5 million.

In the general case, such an arrangement is possible when the authorities turn from pure buyers of currency into its sellers. In other words, the intervention of the National Bank on the stock exchange and spending on debt repayment turned out to be greater than the flow of foreign currency into reserves from various sources.

In the main directions of monetary policy for 2021, the National Bank admits a reduction in reserves to 6 billion USD. Thus, the size of the gold and foreign exchange reserves from January to December may potentially decrease by more than 1.4 billion USD.

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