"Events Of Apocalyptic Scale May Happen To The Belarusian Economy"

The National Bank had to specifically explain the "amazing phenomenon".

August 6, the National Bank boasted that its foreign exchange reserves had increased by $400 million in July. They have increased by $3 billion since the beginning of the year. Now the National Bank has $12 billion in reserves, and it has never had such reserves in the entire Belarusian history. The surprising phenomenon is that it happens against the background of a sharp deterioration of the trade balance.

Where the National Bank gets the money and why the authorities pump up the reserves - in the new issue of the program "Optimum" on the YouTube channel "Belarusians and the market".

The sudden growth of reserves began in March this year, when they immediately increased by $660 million. Then the reserves grew at a slightly more modest pace, but still much faster than before.

And this is a surprising phenomenon. Because the growth of reserves is taking place against the background of deterioration of Belarusian trade. Trade deficit, if we count goods and services for five months, was 800 million dollars. That is, we spend more than we earn.

No one is giving new loans. The deficit on the current account only for the first quarter was $2 billion. So, where does the Belarusian National Bank get such money?

If the reserves were growing in 2023, say, it could still be somehow understandable. Foreign trade was fine then. But for the whole year 2023, the reserves grew by 200 million. That is fifteen times less than in the first seven months of this year. For 2024, when we again had a trade surplus for most of the year, reserves grew by $800 million.

And now they're growing every month faster than they used to grow in an entire year. And it is so amazing that even the Belarusian National Bank had to explain this outstanding phenomenon.

"The chosen policy of gold and foreign exchange reserves management has brought us a very good return due to the fact that we kept a significant part of our assets in monetary gold and other highly liquid assets. Accordingly, the increased cost of gold in the world market has played a very active role in strengthening our reserves," said head of the National Bank Roman Golovchenko in late May.

And it may even seem logical. There is a lot of gold in Belarusian gold reserves, gold is becoming more expensive in the world. And in fact, in 2023 and 2024, Belarusian gold reserves were growing for this very reason. But not now.

In July, gold in the reserves rose in price by $19 million, while the currency was added by $390 million. That is, the National Bank is not just lying. The National Bank lies to downplay its achievements. And this is an outstanding phenomenon in itself. They could have told about the wonderful Belarusian economy, thanks to which the Belarusian reserves were growing so wonderfully. But instead they say: we had nothing to do with it, success had nothing to do with it, we were just lucky. Gold has gone up in price.

Although the rise in the price of gold can explain less than half of the increase in reserves. And the rest is currency purchases.

In July, according to the National Bank, the supply of currency exceeded demand by 492 million dollars. At the end of seven months, the excess amounted to 800 million.

Belarusian enterprises did not contribute to the stability of the currency market. Which is generally not a surprise, given how things are with Belarusian exports. Over seven months, the demand of enterprises for foreign currency exceeded the supply by $1.2 billion.

But the supply of foreign currency by households was $850 million higher than the demand. And it's not just the fact that people are exchanging their currency reserves for rubles. An important factor is the transfer of money in one form or another to Belarus by Belarusian migrants. Because 600 thousand people, who have left, support their families and relatives with money. Moreover, since there are difficulties with bank transfers due to sanctions, the money is often transferred in cash. And this flow of money from migrants is a significant factor in supporting the Belarusian ruble.

And the second source of foreign currency was non-resident companies of Belarus. Hence the positive balance in the domestic foreign exchange market.

But neither the appreciation of gold, nor this positive balance in the domestic foreign exchange market does not explain such a scale of growth of the National Bank's reserves. That is why there is an impression that the Belarusian authorities pump all the extra money into the reserves of the National Bank. All that was gained by hard work.

And this makes sense only if you expect that the Belarusian economy may face sudden troubles of apocalyptic scale in the very foreseeable future. When economic stability will have to be urgently rescued. Something similar happened in 2021, when the Belarusian authorities were also saving money for a rainy day. And now we know the exact date when this rainy day happened.

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