Belarus’s dollar bonds tumbled to the lowest since March on a report the nation will be forced to borrow more from Russia and speculation the government will scupper a program to sell state assets.
The yield on notes due 2015 climbed 39 basis points, or 0.39 percentage point, to 12.277 percent by 12:55 p.m. in the capital Minsk, the highest since March 23, according to data compiled by Bloomberg. The yield on the 2018 note rose 30 basis points to 11.907 percent, a two-month high.
Belarus may need to borrow $9 billion to stabilize its economy, more than the $3 billion already promised by Russia and other ex-Soviet partners, an unidentified Russian diplomat told the Interfax newswire today. Belarus won’t sell its assets “to anybody for nothing,” President Aleksandr Lukashenko said last week. The International Monetary Fund has blamed overspending before last year’s presidential elections for the country’s economic woes.
“The market doesn’t believe Belarus is doing the right thing, that’s clear,” Ivan Tchakarov, chief economist at Renaissance Capital in Moscow, said by e-mail today. “The belligerent rhetoric coming from Lukashenko doesn’t help.”
The country, which borders both Russia and European Union member Poland, will have to sell $7.5 billion of assets to help close a current-account deficit equal to 16 percent of gross domestic product, Russian Finance Minister Alexei Kudrin said May 24. Foreign reserves slid to a 1 1/2-year low in March, and Standard & Poor’s reduced the outlook for the nation’s credit rating, which is five levels below investment grade at B, to negative on May 27.
‘Flurry’ of Speculation
Lukashenko, who bolstered public-sector salaries by 50 percent before last year’s presidential poll, threatened May 27 to fire his government and central bank officials if they fail to stabilize the economy, according to Interfax. He said Russian media created a “flurry” of speculation about the assets sale so that his country’s larger neighbor can “make good at our expense.”
The government today announced that prices on so-called “socially important” products, including some meats, sausages, cheese, fish, salt, coffee and some fruit and vegetables, would be kept on hold for 90 days. Locals have been stocking up on everything from flour to refrigerators since the National Bank of the Republic of Belarus devalued the ruble by 36 percent against the dollar.
The central bank set an official ruble rate of 4,977 per dollar today. Trading by individuals and on the interbank market is not allowed to deviate from that level by more than 2 percent.
No Positive News
The Minsk-based regulator said yesterday the country’s refinancing rate would be lifted tomorrow for the fourth time this year to 16 percent, according to data compiled by Bloomberg. The nation is increasing rates because of “rising consumer prices and high inflationary expectations,” the central bank said in its statement yesterday. Belarusian inflation accelerated to 14 percent in March, the fastest since April 2009.
Regulators may have to raise the rate to as high as 25 percent, according to UniCredit SpA.
“There is no positive news coming through,” Dmitry Gourov, an emerging-markets analyst in Vienna at UniCredit, said by e-mail today. “People are doubting the ability of the government to close the support from Russia following the comments from Lukashenko last week about the privatization program.”
Finance ministers of the Commonwealth of Independent States will meet in Kiev, Ukraine, on June 4 to officially sign off on their loan to Belarus. The first $800 million tranche is expected in the week after that, Kudrin said May 24.
The bloc, which includes Russia and Kazakhstan, may force Belarus to agree to conditions such as cutting back state subsidies, more rate increases and a commitment to privatize state assets in exchange for the funds, Renaissance Capital’s Tchakarov said. Belarus, which got a $3.5 billion loan from the IMF during the credit crisis, may also be forced to ask the Washington-based lender for more money, he added.