The government steps up domestic debt to refinance international public debt

April 22, 2016 18:35

On August 8th, Deputy Finance Minister Ermolovich said that in Q3 and Q4 2013 government currency bonds worth USD 500 million would be placed on the domestic market.

The Government has to adjust socio-economic development plans for 2013, in particular it will cut budget for industrial modernization programme against the background of deteriorated international trade and the lack of new international loans. In order to maintain a smooth BYR devaluation, acceptable national gold reserves and service current public debt payments, the government will increase borrowing in the domestic market.

To date, the Government and the National Bank failed to reach agreements with key foreign creditors (IMF, Russia and China) about new loans on reasonable terms. In 2013, the country received only USD 1.375 billion-worth international loans (USD 880 million from EurAsEC ACF and USD 295 million from Russia for the NPP construction). Before the year-end, Belarus might only receive USD 440 million – the last tranche of the EurAsEC ACF loan. The government is therefore forced to revise the currency borrowing plan in the domestic market (upwards). Since early 2013 the government has already sold state bonds total worth circa USD 670 million (including USD 100 million-worth state bonds for individuals). Previously the Finance Ministry planned to issue additional bonds in the second half of 2013 worth USD 400 million.

On August 8th, Deputy Finance Minister Ermolovich said that before the year-end government currency bonds worth USD 500 million would be placed on the domestic market (USD 400 million for businesses and USD 100 million for individuals). The first exchange trading for new issues of securities is scheduled for September 2013. The Finance Ministry plans to use the proceeds to refinance the public debt (since early 2013 Belarus has already paid off USD 864 million), and to maintain the BYR stability at the achieved international reserves’ level (circa USD 8 billion).

Therefore, the government will cut spending on industrial modernization – projected investment in 2013 was circa USD 2 billion. On August 8th, the Finance Ministry recommended to the enterprises, included in the national modernization programme, not to reckon on the state support and to search for alternative funding. Instead, the government will focus on economic security: stabilizing domestic foreign exchange market, maintaining international reserves at acceptable level, and servicing current public debt payments. Belarus’ public debt as of July 1st, 2013 was USD 12.4 billion and had increased since early 2013 by USD 438 million.