Belarusian government will not subsidise most hopelessly unprofitable enterprises in 2016

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April 22, 2016 19:41

In 2015, 27 bankruptcy cases were launched in respect of enterprises crucial for the economy. Due to the deteriorated economic situation, in 2015 one in five enterprises was loss making. Budget deficit is likely to change the state policy regarding the support for insolvent enterprises, and more than 50 enterprises may be added to the list of bankrupts in 2016. According to the Supreme Court, as of January 1st, 2015, Belarusian economic courts started 70 insolvency cases in respect of companies that are important for the economy. On January 1st, 2015 there were only 43 of such cases. In December 2015 alone, five more enterprises filed bankruptcy cases and one of the eight largest alcohol distilleries is preparing to file a bankruptcy suit (Mozyr alcohol distillery). Bankruptcies have grown in number due to the deterioration in the economy. In January-November 2015, one in five enterprises in the country was losing money, and the amount of losses in comparison with 2014 has increased by 2.3 times. In agriculture, without the state support, more than 65% of enterprises are loss making. Cement producers have become completely unprofitable, the excise on alcohol policy has severely deteriorated financial health of enterprises in the industry and two producers of alcoholic products may become bankrupts. Only thanks to significant financial injections, such major engineering giants as MAZ, MTZ and Gomselmash are still afloat. Metallurgy enterprises require financial assistance too. In 2016, the state support policy for state enterprises is likely to change. The main reason behind this decision is austerity measures amid anticipated budgetary deficit. Since oil prices fell below those projected in the state budget plan and due to the devaluation of the national currency, the government will require additional resources to make the public debt payments. In addition, yet another planned source of budgetary proceeds – export duties on oil products – is unlikely to raise USD 1.1 billion, which would also require sequestration of budget expenditures. Funds allocated to support the economy and subsidise interest rate on loans is a budget line, which is likely to be substantially revised downward. The state will focus on supporting only the key enterprises of major socio-economic importance to the country, small businesses may be subject to readjustment process, and the number of state-owned enterprises that may file for bankruptcy is likely to exceed 50 by late 2016. Overall, economic recession in 2015 led to a growth in number of state enterprises to undergo financial recovery procedure. Given the limited budgetary potential in 2016, support for loss-making enterprises will be curtailed, which will lead to the bankruptcy of 50 or more enterprises not having crucial importance for the economy.

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