Belarusian government intends to sell bad debts
The Finance Ministry has proposed to create debt collector companies to address the issue with settlements in the economy. The size of bad debt in the economy has reached USD 5 billion and continues to increase. Debt collectors would provide cash to creditors and investors would have a new investment opportunity.
The Finance Ministry has submitted a draft decree to the President, aiming to improve the financial market and enabling banks and enterprises to sell their debts in order to finance own activity. The draft decree envisages to create specialised financial organisations, which would issue own bonds and use raised funds to purchase bad debts from banks and enterprises. Such bad debts would include debt on various types of loans, payments under leasing contracts and other receivables.
The Finance Ministry’s proposal is aimed at addressing the deteriorated situation with payment settlements in the economy. As of March 1st, 2017, every fourth rouble of accounts receivable was troubled, and the volume of accumulated bad debt totalled BYN 7.6 billion or about USD 4 billion. Overall, 76% of organisations had bad debts. That said, some bad debt was due to lengthy period for payment instalments for delivered products. In addition, the economy has accumulated bad debts on loans and borrowings from enterprises, totalling BYN 3.1 billion or USD 1.6 billion. Since early 2017, problem debt in settlements has increased by more than 11%.
If adopted, the decree would address several issues. Creditors would partially recover their debts, which they could use for current operations. Specialised financial organisations would step up activity to sell products and services of the debtor in order to recover the debt to the maximum. For the debtor, the debt volume would remain unchanged, only the creditor would change. Funds for these transactions could be raised through bond issues by debt collectors and their subsequent sales on the market, which could become a new investment opportunity, both for private and legal persons. Debt collectors are unlikely to solve the issue with the entire size of bad debt due to the impossibility to meet the requirements of all creditors in full. Depending on the final wording of the decree, the volume of distressed assets in the economy is likely to decrease and the situation with payments in the economy is likely to improve.
Overall, the government proposes to solve the bad debt issue in the economy with the aid of debt collectors. The new mechanism would help businesses to get cash in lieu of debts and to solve current problems at enterprises at the cost of part of the debt.
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.