Citizens and businesses’ currency savings as a source of debt refinancing
2013 will mark the beginning of substantial external debt repayment period for Belarus. Interest rates on foreign currency deposits in the domestic market are lower than the foreign loans rates. A new savings strategy could avoid the need for external borrowing.
On October 4th, 2012 Finance Minister Kharkovets spoke about the possibility to place foreign currency bonds in the domestic market.
In 2013 Belarus will have pay off USD 2.9 billion. It is unlikely that the IMF loan will be refinanced, bearing in mind Belarus’ commitment to high GDP growth, which contradicts the IMF recommendations. In addition, cooperation on a new credit programme is halted by political factors.
Belarus agreed to refinance the Belaruskali loan at 8.5% for a three-year period. This rate is much higher than the rates prevailing in the domestic deposit market. In August the average rate on new short-term deposits in foreign currency for the population was 5.8% per annum and 3.6% for legal persons.
The government has reiterated its desire to raise population’s funds in the country’s economy several times. However, the increase in deductions on funds in foreign currency up to 12% would result in a further rates’ reduction and the currency outflow from the banking system.
Given the circumstances, the state could issue foreign currency bonds in the domestic market. In spring 2012, with 9% annual rate, there was a high demand for banks’ foreign currency bonds. New issues were bought out in short terms.
There are some technical difficulties with issuing bonds for private persons. However, the state could issue foreign currency bonds and simultaneously announce amnesty of capital, which has been planned. The state could consider amnesty of capital, which was invested in state-currency bonds with a lower interest rate than in the foreign loans market. These funds could be put in the turnover in Belarus and the public debt servicing cost could be reduced.
Therefore the Finance Ministry can assist the creation of a new investment instrument, to reduce the debt servicing cost and bring additional resources in the economy.
According to Decree No. 221 of June 23rd, 2017, deadlines for the completion of foreign trade operations have been extended from 90 to 180 days for exports and from 60 to 90 days for imports. Delayed payments entailed a fine up to 2% of the transaction cost for each day of the delay, but could not exceed the total cost of the transaction. Most companies, when working with new counterparties, require a deferred payment for a period of three to six months. Due to the new regulation, violations are likely to reduce in number, so as the fines. Trade enterprises are likely to expand the assortment list due to the supply of new products in small lots, and the assortment list of exported Belarusian goods could expand, too. The new terms for completing foreign trade transactions would enable medium and small companies on the foreign trade market, exporters and importers are likely to grow in number and the geography of export-import operations could expand.