Belaruskali Will Repay $1 Billion Loan in September
September 20, 2012, Belaruskali intends to repay $1 billion syndicated loan issued by Sberbank of Russia and the Eurasian Development Bank ahead of schedule by a lump sum, the company said. The sources of repayment are likely to be government funds (USD 800 million) and Belaruskali’s own funds (USD 200 million).
The Finance Ministry of Belarus will pay USD 800 million of a loan at the expense of early repayment of foreign currency bonds , acquired by Belaruskali. The rest sum will be redeemed at the expense of the enterprise own funds. Accordingly, the source of repayment of foreign currency bonds are government funds, which are stored in the accounts at the central bank. So, as of May 1, National Bank obligations to the government account for USD 7. 282 billion and Br4. 167 trillion.
Thus, the early repayment of a syndicated loan will have no significant impact on supply and demand of foreign currency in the domestic market, since the funds that had previously been enrolled in the gold and currency reserves are to be used. Accordingly, in this case, international reserve assets of Belarus will decline in September this year (ceteris paribus).
However, a potential decrease in the gold and currency reserves should not be overdramatized.
In our view, it is better to pay off an expensive loan rather than try to ensure a formal compliance of the gold and currency reserves with specific criteria for adequacy of international reserve assets (for example, the criterion of three months of imports).
Thus, as of May 1, the foreign reserves of Belarus, as determined by IMF Special Data Dissemination Standard, amounted to USD7. 975 billion, which corresponds to approximately 1.7 months of current external payments associated with the movement of goods, services, income and transfers.
The calculation was performed in accordance with the payment rate for the import of goods and services, income and transfers (including export customs duties on oil and petroleum products enrolled to the Russian budget) in April 2012 – USD 4. 802 billion.
In general, in a more flexible exchange rate regime of the Belarusian ruble a practical significance of the criteria of adequacy of reserves is objectively reducing. At present, Belarus’ gold and currency reserves are primarily needed to create a safety cushion in terms of making payments on external public debt. Under the new exchange rate regime, the National Bank will not resort to significant foreign exchange intervention in support of the Belarusian ruble exchange rate. In contrast, the Central bank bought in the domestic market more than USD1 billion on a net basis this year.
Therefore, under conditions when the volume of foreign currency supply exceeds over demand there is a decline in need in foreign credits and loans. For instance, in January-April 2012 Belarusian companies sold USD896. 5 million net worth while the population - USD619. 9 million net worth (including non-cash transactions).
Thus, repayment of the syndicated loan issued by Sberbank of Russia and the Eurasian Development Bank ahead of schedule will allow the Belarusian side to save foreign currency by reducing the interest and commission payments. The interest rate on the loan is now high: in the first six months it was at the level of LIBOR rate (1,1%) + 7,6 percentage points; over the next six months the interest rate has increases by 0.3 percentage points accordingly. In other words, the current rate on the loan is about 9% (excluding commission charges).
However, it cannot be excluded that Belaruskali will attract a new loan from Russian banks, or refinance the current loan on more favorable terms. This issue was probably discussed during the visit of the Russian delegation to Belarus.
The Belarusian authorities regard the Catholic conference as yet another international event to promote Minsk as a global negotiating platform. Minsk’s proposal to organise a meeting between the Roman-Catholic Church and the Russian Orthodox Church is rather an image-making undertaking than a serious intention. However, the authorities could somewhat extend the opportunities for the Roman-Catholic Church in Belarus due to developing contacts with the Catholic world.
Minsk is attempting to lay out a mosaic from various international religious, political and sportive events to shape a positive image of Belarus for promoting the Helsinki 2.0 idea.
Belarus’ invitation to the head of the Holy See for a meeting with the Patriarch of the Russian Orthodox Church should be regarded as a continuation of her foreign policy efforts in shaping Minsk’s peacekeeping image and enhancing Belarus’ international weight. The Belarusian authorities are aware that their initiative is unlikely to find supporters among the leadership of the Russian Orthodox Church in Moscow. In Russia, isolationist sentiments prevail.
In addition, for domestic audiences, the authorities make up for the lack of tangible economic growth with demonstrations of growth in Minsk’s authority at international level through providing a platform for religious, sportive and other dialogues.