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Belarus May Need IMF Help on Top of Loans, UniCredit Says

Belarus may need a $2.5 billion International Monetary Fund loan package to help cover its external financing gap after the country’s foreign reserves plunged, according to UniCredit SpA.

The eastern European country allowed its currency, the ruble, to depreciate on March 29 as part of a strategy to reduce a current-account deficit equivalent to 15.6 percent of gross domestic product last year. It is also seeking a $3 billion loan from Russia and former Soviet partners to plug its financing gap after running down foreign reserves to $2.2 billion as of the end of February, according to data compiled by Bloomberg data. Reserves cover about one month of imports, the Royal Bank of Scotland Group Plc said March 25.

“The loss of 20 percent of the central bank’s foreign-exchange reserves since the start of the year, some $1 billion, comes amid an uncertain external financing profile,” Dmitry Gourov, an emerging-market strategist at UniCredit in Vienna, wrote in the note. In addition to funding from Russia and the Eurasian Economic Community, “there is a high chance that an IMF package will be requested in the second half,” he wrote.

The country last applied for an IMF loan during the global credit crunch and got a $3.5 billion bailout in 2009 from the Washington-based lending institution. The program expired last year.

Belarus has an external financing gap of $4.6 billion this year, according to the IMF. The country has issued 7 billion Russian rubles ($247 million) and $1.8 billion of bonds since July, equivalent to 4 percent of GDP, according to UniCredit calucalations.


“The core of the problem has been the unsustainable developments on external financing side,” Gourov wrote. “Similar developments were taking place on the private side too, where banks and corporates rushed to gain external financing,” leaving private banks with a deficit in net foreign assets since the second half of last year after maintaining surpluses from at least 2005, he wrote.

The central bank may allow the ruble to fluctuate as much as 12 percent from the official exchange rate, the Interfax news service reported today, citing a Belarusian official it didn’t identify. Policy makers permitted a deviation of as much as 10 percent on March 29, a move that UniCredit said allowed for an 8 percent devaluation of the ruble, even as the immediate effect has been “limited” because the interbank market remains “fairly thin,” according to the note.


President Alexander Lukashenko linked his country’s foreign currency difficulties to increased demand for used cars imports from abroad, the Belarusian state-owned news agency Belta reported today. Lukashenko believes that the situation “is calming down,” the news service quoted him as saying. Tariffs for car imports by individuals in Belarus will be raised to the level of those applied in Russia and in Kazakhstan from July 1, according to Belta.

“But honestly, if there is currency available, go ahead and buy or sell it,” Lukashenko said to journalists in the Brest region of Western Belarus, the agency reported. “If there is none, we will not tap our reserves any more. Our gold and currency reserves are sacred.”

The Russian government raised duties at the start of 2009 on imported new and used cars to protect domestic producers. The tariffs range from 30 percent to 35 percent.

Yields on Belarus’s 2015 dollar bonds fell 37 basis points to 11.12 percent as of 7 p.m. in Minsk, while its 2018 dollar notes traded at 11.039 percent, down 47 basis points from yesterday’s close. The Belarusian ruble was 0.1 percent weaker at 3,050 per dollar, leaving its overall drop this year at 1.7 percent.

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