Belarus is likely to repay her external liabilities in next 18 months
Moody's has noted low risks with servicing Belarus’ external public debt over the next 1.5 years. Taking into account the growth in public debt in recent years, public debt servicing costs have become one of the most costly items in the state budget. Successful Eurobond sales on foreign markets and an agreement with Russia would help to close issues with repaying public debt in 2018 and would reduce the urgency of the IMF loan.
According to Moody’s statement of July 11th, 2017, Belarus was close to ensuring full funding for her external debt over the next 18 months, including repayment of Eurobonds worth USD 800 million in January 2018. At the same time, external vulnerability due to low level of currency assets and dependence on external financial support has retained. In 2016, Belarus’ Caa1 rating was confirmed and the forecast was changed from negative to stable.
Servicing and repaying public debt is the key challenge for the Belarusian economy. In 2016, Belarus spent BYN 1.9 billion to service public debt (USD 950 million or 6.8% of the state budget), which exceeded allocations for housing and communal services and housing construction. In 2016, Belarus repaid USD 900 million of public debt and USD 1.5 billion for government bonds in Belarusian roubles and foreign currency inside the country. In 2017, public debt payments would be circa USD 1.1 billion.
The issue with funding of public debt was closed due to the receipt of USD 1.4 billion from the sale of Eurobonds with five and ten year maturity period (completed on June 29th, 2017). In addition, on June 29th, the Belarusian Finance Ministry received the USD 300 million credit tranche from the EDB, despite the failure to meet one indicator. Agreements with Russia on oil have closed the issue of servicing the national debt, since 18 million tons of oil will be processed at the Belarusian refineries, ensuring their optimal load and maximizing the yield of light oil products, export duties from which would be listed in Belarus’ budget. Additional 6 million tons of oil will be re-registered on Belarus, with the subsequent receipt of the export duty from re-exports. In addition, Russia is expected to allocate a USD 700 million state loan to Belarus.
Provided the lack of disputes between Russia and Belarus, the latter would receive the remaining tranches from the EDB, scheduled for 2017-2018, even if she fails to meet some commitments. The book of applications for Belarus’ Eurobonds exceeded USD 2.5 billion, which leaves an additional reserve for attracting investors' funds when needed. That said, Belarus would meet all her public debt obligations, the majority of domestic liabilities will be refinanced at lower interest rates. The IMF loan could help to reduce the cost of external loans, however it is no longer a critical need for the Belarusian authorities, so she is unlikely to rush implementing all the IMF requirements.
Moody's has noted a high probability of full repayment of all state obligations in the next 18 months. Belarus is likely to slow down the negotiations with the IMF, so as Russia has continued to provide financial support to Belarus, and the placement of Eurobonds has demonstrated the potential for additional external borrowing if necessary.
The Belarusian authorities regard the Catholic conference as yet another international event to promote Minsk as a global negotiating platform. Minsk’s proposal to organise a meeting between the Roman-Catholic Church and the Russian Orthodox Church is rather an image-making undertaking than a serious intention. However, the authorities could somewhat extend the opportunities for the Roman-Catholic Church in Belarus due to developing contacts with the Catholic world.
Minsk is attempting to lay out a mosaic from various international religious, political and sportive events to shape a positive image of Belarus for promoting the Helsinki 2.0 idea.
Belarus’ invitation to the head of the Holy See for a meeting with the Patriarch of the Russian Orthodox Church should be regarded as a continuation of her foreign policy efforts in shaping Minsk’s peacekeeping image and enhancing Belarus’ international weight. The Belarusian authorities are aware that their initiative is unlikely to find supporters among the leadership of the Russian Orthodox Church in Moscow. In Russia, isolationist sentiments prevail.
In addition, for domestic audiences, the authorities make up for the lack of tangible economic growth with demonstrations of growth in Minsk’s authority at international level through providing a platform for religious, sportive and other dialogues.