Once again, loans are the main way of topping-up trading accounts
The current account surplus, achieved in the first half of 2012, was offset by the performance results in the third quarter. Belarus resumed to foreign borrowing to sustain its current activities at the same level. An alternative would be to sell large SOEs.
On December 7th the data about Belarus’ balance of payments in Q3 2012 was published.
In the first half of the year, the balance of payments was positive with a USD 704.8 million surplus. This was the maximum positive value since the first half of 2005, when the surplus was USD 870.5 million. In January – September 2012 the deficit of the country’s current account was USD 130.1 million
The main reasons for the country’s current account balance sliding into negative figures was a significant reduction in trade in goods and services and the growth of interest payments on investments and loans. In the first half of 2012 the foreign trade surplus in goods and services was USD 1761 million quarterly, in Q3 2012 it was USD 160.5 million.
The growing deficit in “Primary proceeds” could not be stopped by the record high level of “workers’ wages”. In Q3 Belarusian citizens earned USD 202.2 million working on contracts abroad, which is an absolute record ever since the National Bank started collecting these data.
The reason behind the deficit is the interest payment on Belarus’ loans. Interest payments to service the gross external debt in the past nine months only were USD 973.6 million, which is 6.3% higher than in 2011.
To finance the current account deficit in Q3 2012, Belarus has been using foreign direct investment, trade credits and advances. But these instruments, as a rule, are associated with additional charges for the borrower, and increase the subsequent payments in “Primary proceeds”.
Thus, in Q3 Belarus returned to its previous practices of financing its activities by foreign investment and new loans, despite the significant improvement in the foreign trade and the effect of the devaluation in 2011. An alternative would be the sale of state enterprises. But the Belarusian government is not yet ready to do so.
Over the past year, military-political relations between Minsk and Kyiv have become complicated. Due to their high inertia and peculiarities, this downward trend would be extremely difficult to overcome.
The root cause of the crisis is the absence of a common political agenda in the Belarusian-Ukrainian relations. Minsk is looking for a market for Belarusian exports in Ukraine and offers its services as a negotiation platform for the settlement of the Russo-Ukrainian war, thereby hoping to avoid political issues in the dialogue with Kiev. Meanwhile, Ukraine is hoping for political support from Minsk in the confrontation with Moscow. In addition, Ukraine’s integration with NATO presupposes her common position with the Alliance in relation to Belarus. The NATO leadership regards the Belarusian Armed Forces as an integral part of the Russian military machine in the western strategic front (the Baltic states and Poland). In addition, the ongoing military reform in Ukraine envisages a reduction in the number of generals and the domestic political struggle makes some Ukrainian top military leaders targets in politically motivated attacks.
Hence, the criticism of Belarus coming from Ukrainian military leadership is dictated primarily by internal and external political considerations, as well as by the need to protect the interests of generals, and only then by facts.
For instance, initially, the Ukrainian military leadership made statements about 100,000 Russian servicemen allegedly taking part in the Russo-Belarusian military drill West-2017. Then the exercises were labelled quazi-open and military observers from Ukraine refused to provide their assessment, which caused a negative reaction in Minsk. Further, without citing specific facts, it was stated that Russia was building up its military presence in Belarus.
Apparently, the Belarusian and Ukrainian Defence Ministries have entangled in a confrontational spiral (on the level of rhetoric). Moreover, only a small part of the overly hidden process has been disclosed. That said, third states are very likely to take advantage of the situation (or have already done so). This is not only about Russia.
The Belarusian Defence Ministry officials are restrained in assessing their Ukrainian counterparts. However, such a restraint is not enough. Current military-political relations between Belarus and Ukraine are unlikely to stabilise without the intervention of both presidents.