Belarus Ruble May Devalue 20% on Deficit, UniCredit, RBS Say

By Jack Jordan

Belarus may devalue its ruble by at least 20 percent in the coming weeks as the former Soviet republic depleted reserves to plug its current-account deficit, according to UniCredit SpA and Royal Bank of Scotland Group Plc.

The country’s reserves including foreign currencies and precious metals dropped 20 percent this year to $4.02 billion at the end of February, according to data on the central bank’s website. This year’s retreat follows a 11 percent drop last year, the data show.

“We assume that the draw down in reserves continued in March,” Timothy Ash, head of emerging-market research at RBS in London, wrote in a report today. “What seems clear is that absent external financing assistance, the exchange rate needs to adjust significantly weaker.”

Belarus’s ruble headed for its biggest two-day decline in five months today, while bonds rebounded after yields on the government’s 2015 and 2018 dollar debt surged to record highs. The country has at least $2 billion of ruble and dollar debt outstanding, according to data compiled by Bloomberg.

This current reduction in reserves may force the central bank to devalue the ruble by 20-30 percent, Ash said. The currency may depreciate 20 percent, according to UniCredit. Belarus devalued its currency by about a fifth in January 2009 after banks’ access to financing froze in the wake of the worldwide credit crunch and as demand for exports shrank.

The country’s current-account deficit was 16 percent of gross domestic product last year, more than double the level relative to economic output for Greece at about 11 percent, according to data compiled by Bloomberg.

‘Immediate Solutions’

“Immediate solutions are needed,” Dmitry Gourov, an emerging-market strategist at UniCredit in Vienna, wrote in an e-mailed note today. “Devaluation is still likely in the coming weeks.”

Standard & Poor’s cut its rating on Belarusian debt one step to B, five steps below investment grade, on March 15, citing “‘uncertainties” in “its external funding gap in 2011 and the corresponding pressures on the exchange rate.”

Belarus requested a $1 billion loan from Russia and a $2 billion loan from an anti-crisis fund set up by the Eurasian Economic Community, a grouping of post-Soviet nations, Russian Finance Minister Alexei Kudrin said on March 15 in Minsk, following a meeting with Belarus Prime Minister Mikhail.

“Only privatization to Russia and loans from Moscow can support the country,” Gourov wrote. “This takes time.”

Belarus’s ruble fell 0.2 percent, extending the two-day slump to 0.4 percent, at 3:25 p.m. in London. The 2015 bond rebounded, driving the yield 19 basis points higher to 12.19 percent. The yield on the four-year note soared 249 basis points in the previous two days.

To contact the reporter on this story: Jack Jordan in London at

To contact the editor responsible for this story: Gavin Serkin at


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