Details: FX debt’s pressure on Belarus’ reserves due to increase in Q3

<p> MINSK, Aug 3 - PrimePress. As of July 1, Belarus’ international reserve assets stood at $7.409 billion. The National Bank says the country’s foreign exchange reserves fell by $353.8m month on month in in June 2021, a year-to-date decline of $59.1m. </p> <p> The official forecast says that Belarus’ international reserve assets should be at least $6 billion on 1 January 2022. </p> <p>   </p> <p> According to the National Bank of Belarus, the decline in the level of international reserve assets in June was mainly due to the government’s scheduled repayment of foreign and domestic liabilities in foreign currency of about $240 million, as well as a decline in the value of monetary gold. </p> <p>   </p> <p> FX debt’s pressure on reserves due to increase in Jul-Sep </p> <p>   </p> <p> As much as $132 million was spent in May to repay the government’s foreign currency liabilities, and $120 million in April. According to the National Bank, external debt spending in Q2 was expected at $0,4 billion and another $0.8 billion is due to be paid in the third quarter. Thus, the FX debt’s pressure on the reserves will increase in July-September. </p> <p>   </p> <p> It should also be noted that pressure on the authorities' foreign exchange reserves is growing under the influence of negative expectations of economic entities, as well as due to Western sanctions against the Belarusian economy. </p> <p>   </p> <p> In June, individuals continued to be net buyers of hard currency in the domestic foreign exchange market. Private households have been net buyers of foreign currency for 19 months in a row (i.e. their FX purchases from banks exceeded their FX sales). This creates difficulties for the banking system and the National Bank, as foreign exchanged has to be sought, and Belarusbank, Belinvestbank and Belagroprombank were put on the EU’s sanctions lists. </p> <p>   </p> <p> In June, enterprises and private households demonstrated an increased demand for foreign currency and withdrew foreign currency resources from deposits in the banking system. In June, foreign currency deposits in the system as a whole fell by more than $300m. According to preliminary estimates, the withdrawal of foreign currency deposits declined in July, but on a net basis the outflow of foreign currency did not stop. </p> <p>   </p> <p> The official reserves are positively affected by the rising cost of oil, which leads to an increase in budget revenues from export duties. According to the Russian Ministry of Finance, the average price of Urals oil reached $62.50/bbl in April, $66.63/bbl in May and $71.4/bbl in June. The 2021 budget plan provided for revenues from duties in the amount of Br0.3 billion ($120 million at the exchange rate of the National Bank of Belarus), with Urals oil price standing $40/barrel. The 2021 revenues target is realistic, as actual oil prices since the beginning of the year are higher than the budgeted ones. </p> <p>   </p> <p> Russia offers loans instead of direct compensation </p> <p>   </p> <p> On June 2, Belarus’ Ministry of Finance reported that in accordance with the agreement on the provision of a state financial loan to Belarus, signed on December 21, 2020, the Ministry of Finance received the second tranche of the loan in the amount equivalent to $0.5 billion. Under the terms of the agreement, the loan is denominated in Russian roubles and cannot be used directly to support Belarus' foreign currency reserves, as the Russian rouble is not part of the relevant FX basket (the basket includes the dollar, euro, yuan, yen, etc.). However, it can be used to repay the debt to Russia, which was confirmed by the Belarusian Finance Ministry in early July. </p> <p>   </p> <p> In particular, the press service of the Ministry of Finance noted that “the sanctions imposed have not changed the previously outlined approaches to refinancing the government debt in the current year; borrowing in the Eurobond market in 2021 was not originally planned.” As sources of funding for public debt payments in 2021, the ministry named the second tranche of the Russian state loan ($500m), placement of securities on the Russian financial market, a loan from the OPEC Fund for International Development ($20m) and placement of government bonds on the domestic market. </p> <p>   </p> <p> The Finance Ministry added that “in the medium term, borrowings on the Russian financial market, the Asian financial market, as well as the domestic financial market are considered as sources of refinancing state debt payments”. </p> <p>   </p> <p> It should be noted that Eurobond placement is actually a no-go option for Belarus - it is too expensive. As of July 29, 2021, quoted on the Frankfurt Stock Exchange, Belarus' Eurobonds with maturity in February 2023 were 99.9% of par value, 97.5% with maturity in June 2027, 87.5% with maturity in February 2030, and 87.8% with maturity in February 2031. The coupon rates on these issues are 6.875%, 7.625%, 6.2%, and 6.378%, respectively. </p> <p>   </p> <p> As for Belarus’ sovereign bonds on the Russian market, up to RUB100bn is expected to be raised from the Russian market in 2021-2023. This is stipulated in presidential ordinance of 13 May 2021 "On attracting external government loans", which describes the conditions for borrowing. The Ministry of Finance and other government agencies are making preparations to enter the Russian market with government bonds this year. </p> <p>   </p> <p> On the whole, the government’s foreign currency borrowing in 2021 is envisaged at the level of $900 million, FX debt payments at about $3 billion. Principal debt repayments will reach $1.9bn, interest payments $1.1bn. End </p>

2021-08-04

Primepress