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.
President Lukashenka continues to rotate staff and rejuvenate heads of departments and universities following new appointments in regional administrations. Apparently, new Information Minister Karliukevich could somewhat relax the state policy towards the independent media and introduce technological solutions for retaining control over Belarus’ information space. New rectors could strengthen the trend for soft Belarusization in the regions and tighten the disciplinary and ideological control over the student movement in the capital.
President Lukashenka has appointed new ministers of culture and information, the new rector of the Belarusian State University and heads of three universities, assistants in the Minsk and Vitebsk regions.
The new Information Minister Karliukevich is likely to avoid controversial initiatives similar to those former Minister Ananich was famous for, however, certainly within his capacities. Nevertheless, the appointment of Belarusian-speaking writer Karliukevich could be regarded as the state’s cautious attempt to relax environment in the media field and ensure the sovereignty of national media.
The Belarusian leadership has consolidated the trend for mild Belarusization by appointing a young historian and a ‘reasonable nationalist’, Duk as the rector at the Kuleshov State University in Mogilev. Meanwhile, while choosing the head of the Belarusian State University, the president apparently had in mind the strengthening of the ideological loyalty among the teaching staff and students at the main university in order to keep the youth movement at bay. Previously, Korol was the rector of the Kupala State University in Grodno, where he held purges among the disloyal teaching staff.
The trend for the renewal of mid-ranking executives and their rejuvenation has confirmed. The age of the Culture Minister and three new rectors varies from 39 to 44 years old.