On February 20th, a report by the Belarusian Economy Minister, presented on February 13th, 2013 at the Council of Ministers, was published.
Economy Ministry projected a negative international trade balance for 2013. Modernization costs in 2013 projected at USD 1.6 billion. The gap in the balance of payments can be compensated either by FDI, or by currency devaluation.
In 2012, the trade surplus was positive – USD 111.5 million, which was achieved due to ‘innovative' schemes used in foreign trade until November 2012. In 2013, the Economy Ministry does not envisage such schemes and projects a negative international trade balance – minus USD 1 855 million. Foreign trade cannot become a modernization funding source in 2013.
Economic modernization requires increased equipment purchases. In 2013 it will require additional USD 1.6 billion. Domestic sources are limited and the privatization has almost halted. Management at state-owned enterprises is not interested in changing the existing relationships and personals sanctions for initiatives in attracting investors create additional restrictions.
Current account balance is expected to be negative in 2013: minus USD 5.1 billion. The Economy Ministry projected, that the main source of financing the current account deficit will be FDI – USD 4.5 billion. Alternatively, this amount would be collected through international loans or currency devaluation. The IMF is unlikely to lend to Belarus in 2013, Eurobonds could attract about USD 500mln - 600mln, the EurAsEC ACF is not independent in its decisions and the overall volume of funding in 2013 (under the most favorable conditions) would be USD 1.2 billion. Gold reserves could be the last resort for covering the gap in payments accounts, but the current gold reserves levels are insufficient to ensure financial security.
Thus, the government will have to make the modernization plans' performance dependent on the success in attracting FDI, mainly large loans. If the commitment to implement the plan prevails over the economy's capacity the 2011 crisis will repeat, i.e. landslide devaluation and associated consequences.