Where is Lukashenko’s gold?

Pavel Latushka: Deputy Head of the United Transitional Cabinet of Belarus, Representative of the Cabinet for the Transition of Power, Head of the National Anti-Crisis Management, Leader of the "Latushka Team and the Movement 'For Freedom'" faction within the 3rd convocation of the Coordination Council.

Why is Belarus increasing its gold and foreign currency reserves amid a trade deficit and current account imbalance?

Today I want to talk about an important and, at first glance, paradoxical phenomenon in the Belarusian economy: why, despite a negative foreign trade balance and a current account deficit, the illegitimate authorities continue to build up gold and foreign currency reserves — and what this means for the country’s economic development and future. What is the Lukashenko regime preparing us for?

Let me start by reminding you: foreign exchange reserves are foreign currencies, gold, special drawing rights, and other assets that the National Bank and the government can use to:

• service external debts,

• smooth out exchange rate fluctuations,

• maintain confidence in the national currency.

In other words, foreign exchange reserves (FERs) are the state’s "insurance policy" in case of external economic shocks.

If we look at the official statistics, we see an interesting fact:

• At the beginning of 2025, Belarus’s foreign exchange reserves totaled just over USD 8.9 billion.

• By July 2025, they had surpassed USD 11.5 billion.

• The share of gold in the reserves increased from USD 4.5 billion to USD 5.7 billion, and the currency part also grew — from USD 3 billion to USD 4.4 billion.

At first glance, growing reserves would seem to mean more opportunities to maintain economic stability.

But this growth is happening against the backdrop of a negative foreign trade balance and a current account deficit. In the first quarter of 2025, the negative balance — that is, the net outflow of money from goods, services, and capital — became larger than for the entire previous year. Specifically, for January–March 2025, the current account deficit amounted to minus USD 2 billion, which is about 11% of GDP for that period.

At the same time, according to Belstat, the trade deficit in goods for January–May 2025 reached USD 2.6 billion — a billion more than during the same period in 2024. According to the National Bank, the negative trade balance in goods and services for the first four months of this year was USD 856 million.

What does this mean?

It means the country is clearly spending more foreign currency than it earns. In recent months, Belarus has seen:

• a decline in export earnings, partly due to sanctions and shrinking markets;

• a rise in imports, including raw materials, components, and consumer goods;

• a need to service interest and repay principal on foreign debt.

Usually, such conditions lead to a decline in reserves, because if a country spends more currency than it earns, its "safety buffer" should shrink.

So why isn’t this happening? Where is the foreign currency coming from?

The answer is — external financing.

Belarus’s gross external debt increased by USD 2.2 billion in the first quarter of 2025 and as of April 1 stood at USD 37.4 billion. Belarus received loans and financial assistance from Russia, and partially borrowed through Eurasian mechanisms.

Some of these funds go directly to debt servicing and economic support, and some are deposited by the National Bank into reserves.

This raises a logical question: why accumulate reserves when there’s a deficit?

There are several reasons:

1. Servicing external debt.Belarus has to repay and service foreign debt annually — this amounts to several billion dollars per year. If there’s suddenly not enough currency, the government would be forced either to sharply devalue the ruble or declare a default — both scenarios are extremely dangerous.

2. Smoothing exchange rate fluctuations.The Belarusian ruble is sensitive to political and external shocks. One piece of news can send the population rushing to buy up currency — and the exchange rate may collapse. Having sufficient reserves allows the National Bank to intervene in the market and prevent panic.

3. Containing inflation.The Belarusian economy is import-dependent. Ruble devaluation leads to higher prices for raw materials, equipment, and consumer goods. A stable reserve acts as a "brake" on inflation.

Image.

A sufficient reserve is a signal to investors and domestic businesses. It’s a trust factor.

What does this mean for the exchange rate and inflation?

First, the current account deficit hasn’t disappeared. If a country accumulates foreign exchange reserves not from its own earnings, but from external loans, this means a growing debt burden. Loans, after all, must be repaid eventually.

Second, it increases dependence on allies. If the external financing conditions change tomorrow or are reduced, the country could face a rapid depletion of reserves. Without a trade surplus, there’s no way to close the gap.

Third, an increase in foreign exchange reserves does not automatically mean increased economic resilience, if the structural problems remain: low export diversification and high dependence on specific markets and creditors.

If external support continues, Belarus can continue to keep the ruble relatively stable. Inflation will not spike dramatically.

If support is reduced, but debt obligations remain, the country will have to either spend the reserves or devalue the ruble.

Devaluation will inevitably accelerate prices. The smaller the reserves at that moment, the harder the blow will be.

Accumulating foreign exchange reserves during a deficit is a tactic, not a strategy.

It’s a forced measure that buys time:

• to smooth over the current situation,

• to meet debt obligations,

• to maintain exchange rate stability.

But without sustainable foreign exchange earnings through export development, improved trade conditions, and market diversification, this buffer could be quickly exhausted.

For long-term resilience, Belarus must:

• expand export geography,

• deepen raw material processing,

• reduce import dependency,

• strengthen the domestic market,

• seek new sources of investment.

Thus, the accumulation of foreign reserves today is more a symptom that the country is preparing for possible external or internal shocks. It is reasonable in the short term, but in the long term, the issue of structural deficit and dependence on borrowing must be addressed.

But what kind of shocks is the regime preparing for?

This question remains open. Yet history offers examples of countries accumulating reserves under atypical conditions.

For example, Nazi Germany before World War II. The Third Reich accumulated currency and gold reserves and developed barter schemes to reduce dependency on currency settlements. Today, the Lukashenko regime increasingly resorts to barter and cash transactions.

Lukashenko pays in cash. For instance, leaked correspondence regarding recent deals between the Myanmar militaryand the Lukashenko regime indicates that the latter sent a direct request to Myanmar’s Directorate of Procurementasking for immediate cash payments “in accordance with previous practice.” The request also noted that the Lukashenko regime could even send a plane to Myanmar to collect the cash, referring to prior experience.

And this raises an interesting question: how are such cash-based foreign trade operations reflected in official statistics? Or are these cash flows simply turned into personal funds?

Another example: Iraq before the 2003 war. Despite numerous restrictions, Saddam Hussein sought to increase foreign exchange reserves.

And the most recent and relevant example — Russia before launching its full-scale aggression against Ukraine. From 2014 to 2021, Russia actively built up reserves and diversified them — moving away from the dollar, buying gold and yuan. It is now clear: this was preparation for the risks of a major conflict.

An increase in foreign exchange reserves in itself does not always mean preparation for war, but combined with other signs — militarization, increased defense budgets, strategic purchases — it can be one of the indicators.

In recent years, we’ve seen all these signs in Belarus. Thus, it is already becoming clear that the Lukashenko regime is preparing Belarus for a tragic scenario.

These examples — from Nazi Germany to Putin’s Russia — show that regimes, when preparing for shocks, whether wars, sanctions, or internal crises, often adopt similar strategies: accumulate reserves, switch to barter or cash settlements, and minimize traces in the international financial system.

In the case of Lukashenko, deals with Myanmar and the emphasis on cash hint not only at an attempt to bypass sanctions, but also, possibly, at an effort to conceal financial flows — which may be landing in the personal accounts of Lukashenko’s inner circle.

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