Belarus has no plans to attract new loans

April 22, 2016 18:12

Belarus has no plans to attract new foreign loans on market terms. New external loans will be linked with the refinancing of the accumulated foreign debt and financing of large investment projects. In the meanwhile, external debt payments will put a downward pressure on the international reserves and on the Belarusian ruble exchange rate.

Belarus’ Finance Minister Andrei Kharkovets on June 21 announced that the Finance Ministry was against new external borrowings. The minister said that currently there were unfavourable borrowing conditions on the international financial markets for all countries, including Belarus. Thus, according to Cbonds, on June 21, 2012 the effective yield of Belarus Eurobonds maturing in 2015 was 10.06%. For comparison: on June 21, Ukraine’s Eurobonds maturing in 2021 yield was 9.84%, Hungarian maturing in 2020 - 6.65%, Russian maturing in 2030 - 3.96%, Polish maturing in 2019 - 3.38%, Mexican maturing in 2020 - 2.63%.

Today investors assess Belarusian risks as the highest, after Argentina and Venezuela among developing countries – Eurobond market players.

Mr. Harkovets said placement of new Eurobonds could become feasible in 2013, depending on the situation on international financial markets. He said Belarus planned to issue Eurobonds if yield on the securities was not higher than previous issues. Currently, there are two outstanding Eurobonds issues: one maturing on August 3, 2015 for USD 1 billion (coupon rate is 8.75%) and second maturing on January 26, 2018 for USD 800 million (8.95%).

In 2011-2012 Belarus has paid off to investors their coupon yeild on the two Eurobond issues totaling USD 202.9 million. Future coupon yield payments on Eurobonds in Belarus will be on July 26, 2012 for the Eurobonds’ second issue (USD 35.8 million), and on August 3, 2012 for the First issue of Eurobonds (USD 43.75 million).

In turn, on June 21st Belarus’ first issue bonds in Russian rubles maturing on December 20, 2012 (RUR 7 billion, USD 1 = RUR 33.5191) were traded with 12.38 % yield (purchase) and 11.64% (sale). Therefore placement of new bonds issues on the Russian market is unwise.

Also on June 21st Belarusian government paid off the sixth coupon yield (RUR 151.83 million) to holders of two-year bonds placed on the Russian financial market on December 23rd, 2010. As a result, the total amount of coupon payments on the first bond issue in Russian rubles totaled RUR 910.98 million.

Moreover, in May 2012 the Government of Belarus paid off interest and fees on the IMF loan, amounting to USD 18.268 million. The overall repayment and servicing of the IMF standby loan in February 2009 - May 2012 was USD 303.6 million (see Table 1). The balance of the outstanding payments on the IMF principal loan has decreased from USD 3.484 billion on January 1st, 2012 to USD 3.321 billion on June 1st (taking into account the USD/SDR exchange rate fluctuations).

Table 1

Belarus’ payments to repay and service the IMF loan in 2009-2012.

Date

Payment amount, mln, SDR

Payment amount, mln, USD

Type of payment

05.02.2009

0.433

0.648

Interest and commission

06.05.2009

1.916

2.876

Interest and commission

06.08.2009

2.491

3.904

Interest and commission

05.11.2009

3.343

5.327

Interest and commission

04.02.2010

7.156

11.055

Interest and commission

06.05.2010

10.103

15.037

Interest and commission

05.08.2010

12.850

19.678

Interest and commission

04.11.2010

13.240

21.034

Interest and commission

04.02.2011

13.385

20.928

Interest and commission

05.05.2011

13.470

21.853

Interest and commission

04.08.2011

14.520

23.172

Interest and commission

04.11.2011

13.348

21.066

Interest and commission

06.02.2012

12.206

18.861

Interest and commission

13.04.2012

64.725

99.870

Repayment of principal loan

04.05.2012

11.817

18.268

Interest and commission

Total

195.003

303.578

 

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Figure 1. Belarus’ overall external debt dynamics in 2000-2012, mln. USD

(Factual data and polynomial trend)

According to the National Bank, Belarus’ overall external debt in Q1 2012 decreased by 0.9% to USD 33.727 billion on April 1st (see Figure 1) making 80.1% of annual GDP.

The gross external debt structure in Belarus economy as of April 1st, 2012 is as follows: public administration – USD 12.458 billion (on May 1st, USD 13.440 billion, taking into account government’s guarantees), monetary control authorities – USD 1.402 billion (on June 1st, USD 1.417 billion); banks –USD 5.983 billion (on June 1st, USD 5.624 billion), enterprises – USD 12.840 billion, direct investment within the framework of inter-company loans – USD 1.044 billion.

According to our estimates, payments by Belarusian residents for servicing and repayment of the overall external debt (including principal repayments and interest), will total USD 16.6 billion in April 2012 - March 2013 (including refinancing and prolongation of external loans). External debt payments will put a downward pressure on the international reserves and on the Belarusian ruble exchange rate, and, as well, will slowdown the economic growth in Belarus.