Even as Belarus's foreign-currency assets did not extend their first-half fall into the third quarter, the country's reserve position remains precarious.
IHS perspective | |
Significance | Belarus's total international reserve assets edged up by a marginal rate of 0.2% over the third quarter of 2015, while foreign-currency reserves clearly increased and gold reserves decreased. |
Implications | Belarusian reserve import cover is still significantly inadequate, estimated at just one month. |
Outlook | Belarus needs additional external financial assistance if it is to clear its debt service load next year. In practice, the source of this support would be Russia. |
According to the National Bank of Belarus (NBB), the country's total external reserves (calculated according to the methodology of the International Monetary Fund) at the end of September stood at USD4.6 billion, having remained virtually stable during the third quarter of the year. However, they were 8.5% below this level at the beginning of the year. Foreign-currency reserves, in particular increased by about 24% during the third quarter, whereas gold reserves fell by some 6%. Foreign-currency reserves at end-September nonetheless stood at about 28% below their end-2014 level, easing by 7% during September alone. Meanwhile, the "other" category of total international reserve assets, which according to the IMF definition includes loans to non-bank non-residents and financial derivatives, were eroded by 40% during the third quarter. These accounted for some 10% of total reserves at end-September.
According to a press release form the NBB, reserves in September were supported by foreign-currency bond sales, collection of oil-product export duties, and foreign-exchange purchases. However, repayment of sovereign foreign-currency loans and falling world-market oil prices had a negative impact on total reserves in September. The value of gold reserves in September alone slid by 8%, while total reserves rose by over 1% and foreign-currency assets declined by around 7%. Reserves over the quarter did enjoy a boost from Russia's payment of a loan installment worth USD760 million to Belarusian accounts (see Belarus: 21 July 2015: Russia pays needed loan tranche to Belarus).
The reported strength of oil-product export duties may appear surprising against the background of deteriorating global oil prices, a trend caused by an increase in oil-product export volumes. This is further facilitated by revisions to energy taxation in Russia, having witnessed a cut in the export duty on crude oil this year. This freed additional Russian crude oil for Belarusian import, to be refined at the Mozyr and Naftan facilities, and for further export as oil products.
Outlook and implications
Belarus's foreign-currency reserve situation remains very weak. Even as the latest estimates of customs-based trade published by the Belarusian National Statistical Committee show that, aided by falling imports, the trade deficit in August narrowed to USD90 million, Belarusian import cover remains woefully inadequate. Considering developments to date in 2015, external reserves excluding gold are estimated to cover approximately one month of imports. It will therefore be a certain relief for the central bank that the pressurised exchange rate appears to have stabilised following relatively marginal depreciation against the US dollar over September; the rouble has, in fact, strengthened in October.
However, the weakness of reserves reinforces the outlook of a precarious external financial position, despite the mitigating effect of a weakened rouble on trade balance, through a negative effect on imports as well as providing temporary support to export competitiveness. Belarusian debt-service requirements next year are estimated at USD3 billion, while the country's access to international debt markets and IMF funding remains limited (see Belarus: 29 September 2015: Belarusian hopes for new IMF programme unlikely to be fulfilled). A recent agreement (as reported by RosBusinessConsulting) with Russia, whereby Moscow agreed to delay debt repayments until 2016, therefore provides important near-term relief for inadequate Belarusian liquidity; this follows earlier reports of the loosening of Russian debt-repayment terms (see Belarus: 15 May 2015: Russian debt rescheduling and new Chinese loans bring respite for liquidity-drained Belarus). Belarus's ability to remain financially stable will require additional loans from Russia, or the Russian-led Eurasian Stabilization and Development Fund (previously the EurAsEc Anti-Crisis Fund), to which the country has submitted a request for a USD3billion loan. The latest data on developments in Belarusian external reserves therefore provide little respite to concerns over the country's liquidity (see Belarus: 6 May 2015: IHS downgrades Belarus to potential default as financial pressures tighten).