The credit outlook of Belarus revised to stable from negative
The outlook revision implies S&P’s saw the signs of economic stabilization and improvement of short-term financial conditions in Belarus. In addition, the agency affirmed the short-term rating on Belarus at “C”.
“Foreign currency reserves have strengthened, immediate pressure on the exchange rate has eased, and inflation, although still very high, is decreasing,” S&P said in a statement. However, the ratings on Belarus are constrained by political risks, high government financing needs, reliance on external funding, and the government’s reluctance to introduce much-needed structural reforms to improve the country’s competitiveness and growth prospects.
Belarusian authorities immediately reacted to the improved ratings, announcing plans to accumulate the external debt by the end of the year, inter alia, by issuing Eurobonds – hoping for improved conditions for the Belarusian state securities in the international market. First Deputy Finance Minister, V. Amarin said Eurobonds could be issued “at the end of this year or early next year”. Belarusian authorities consider conditions favourable if return rate is under 10% per year. Mr. Amarin added there were also proposals to refinance the national debt. “We have received these proposals and we are considering them, but refinancing bids fair to be expensive”, he said. Therefore, the government indirectly recognized the existence of external debt repayment challenge and openly declared about searching for ways to refinance the debt.
Belarus’ GDP in the first quarter of 2012 increased by 3% and amounted to Br 105.6 trillion (about $ 13 billion). The projected annual GDP growth is 5-5.5%. Industrial output during this period increased by 8.3%, up to Br 153.6 trillion (about $ 19 billion), with projected annual growth of 6-7%. Investment in fixed assets has decreased by 15.1% to Br 23.5 trillion (about $ 2.9 billion). In March consumer prices increased by 1.5% and by 5% since the beginning of the year.
Over the past year, military-political relations between Minsk and Kyiv have become complicated. Due to their high inertia and peculiarities, this downward trend would be extremely difficult to overcome.
The root cause of the crisis is the absence of a common political agenda in the Belarusian-Ukrainian relations. Minsk is looking for a market for Belarusian exports in Ukraine and offers its services as a negotiation platform for the settlement of the Russo-Ukrainian war, thereby hoping to avoid political issues in the dialogue with Kiev. Meanwhile, Ukraine is hoping for political support from Minsk in the confrontation with Moscow. In addition, Ukraine’s integration with NATO presupposes her common position with the Alliance in relation to Belarus. The NATO leadership regards the Belarusian Armed Forces as an integral part of the Russian military machine in the western strategic front (the Baltic states and Poland). In addition, the ongoing military reform in Ukraine envisages a reduction in the number of generals and the domestic political struggle makes some Ukrainian top military leaders targets in politically motivated attacks.
Hence, the criticism of Belarus coming from Ukrainian military leadership is dictated primarily by internal and external political considerations, as well as by the need to protect the interests of generals, and only then by facts.
For instance, initially, the Ukrainian military leadership made statements about 100,000 Russian servicemen allegedly taking part in the Russo-Belarusian military drill West-2017. Then the exercises were labelled quazi-open and military observers from Ukraine refused to provide their assessment, which caused a negative reaction in Minsk. Further, without citing specific facts, it was stated that Russia was building up its military presence in Belarus.
Apparently, the Belarusian and Ukrainian Defence Ministries have entangled in a confrontational spiral (on the level of rhetoric). Moreover, only a small part of the overly hidden process has been disclosed. That said, third states are very likely to take advantage of the situation (or have already done so). This is not only about Russia.
The Belarusian Defence Ministry officials are restrained in assessing their Ukrainian counterparts. However, such a restraint is not enough. Current military-political relations between Belarus and Ukraine are unlikely to stabilise without the intervention of both presidents.