Budget surplus will not reduce public debt if support for unprofitable enterprises retains
In 2016, the state spent only 2.4% of the budget surplus to repay public debt. The growth in public debt in recent years was due to the inefficient resource management and modernisation failures in many economic sectors. The government has planned to spend almost entire budget surplus in 2017 to repay public debt, however, it may reconsider and spend it on wage growth instead.
According to the Finance Ministry, in 2016, budget revenues totalled BYN 17.7 billion and expenditure at BYN 17.4 billion, eg a budget surplus of BYN 0.3 billion. Meanwhile, in 2016, public debt grew by BYN 4.1 billion, reaching some BYN 37 billion, which was more than double budget revenues in 2016. The public debt grew, inter alia, due to the low specific weight of the budget surplus allocated to repay public debt. In 2016, Belarus repaid BYN 6.7 million of public debt and BYN 1.7 billion of servicing costs, which exceeded the expenditure on the judiciary and the law enforcement altogether.
The problem with public debt growth is associated with two main factors. The state used intergovernmental loans to modernise industry. As a result, instead of new efficient enterprises, which could report sustainable profits and increase production indicators, Belarus has chronically unprofitable organizations, which require refinancing of bad debts on loans, taxes and energy supply debts. The second factor is the need to support unprofitable enterprises which provide employment in mono cities and large settlements, in the absence of other large employers. In 2015 alone, the state spent more than USD 870 million to increase the share in statutory funds of enterprises. The increase in the share was due to the state support (budgetary and loan interest subsidies) with the subsequent increase in the state share in the statutory fund by the amount of the aid.
In 2017, budget surplus is projected at BYN 1.5 billion, of which BYN 1.4 billion would be used to repay public debt. In January – March 2017, public debt decreased by BYN 1.1 billion, inter alia, due to the strengthening of the national currency against the US Dollar. Following the settlement of the oil and gas dispute between Belarus and Russia and due to the higher oil price than projected (USD 35 per barrel), the budget surplus goal could be achieved by the year-end. In addition, the state has somewhat reduced the state support for unprofitable enterprises, making it possible to partially repay public debt from budgetary savings.
The main risk is the resumption of the direct economic management, which, amid GDP growth and repayment of due external liabilities in 2017, could lead to loan interest rates subsidies in order to reach the average wage target at BYN 1000 per month. In this case, the state would once again spend budget surplus on support for enterprises and would postpone the reduction of public debt.
Overall, one of the reasons behind the growth in public debt is the minimum amount of budget surplus allocated to repay the debt. If Belarus makes due public debt payments in 2017 and if high oil prices retain, budget surplus would be allocated to support unprofitable enterprises, instead of reducing public 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.