Domestic borrowing is inexpensive alternative to foreign loans

April 22, 2016 18:22

Belarus is entering a period of foreign debt repayments. The placement of government currency bonds for legal entities showed a demand for alternative investment tools. Considering domestic loans’ rates, domestic loans seem cheaper than foreign ones.

On November 16th, 2012 Finance Minister Harkovets announced potential placement of government currency bonds for individuals by the year-end.

The situation in the domestic currency market in the last month was characterized by the aggregate net demand for foreign currency. The population, from the net currency seller in the first half of the year has turned into currency’s net buyer due to the dynamic incomes growth. In October 2012, the population bought USD 281.4 million net.

The foreign trade situation has changed significantly since August. The foreign trade balance in goods slid to negative values. The restored trade in petroleum products could not compensate for the losses from reduced potash fertilizers sales and suspended ‘solvent and lubricant’ schemes. Foreign exchange revenues from foreign trade do not meet the increased domestic currency demand.

In December 2012, Belarus will refinance Russian ruble bonds worth RUB 7 billion. In October, Belarus repaid Belaruskali’s USD 800 million loan at high interest rate. The anticipated placement of currency government bonds in foreign markets under current circumstances would envisage 8-9% per annum interest rate for Belarusian securities.

Finance Ministry had placed government bonds in the domestic market worth USD 218 million. The yield on the bonds was 7.5% per annum. Placement period was 3.5 years. Both bonds issues, USD 100 million each, were bought by Belarusian banks - "BelVEB" and "Belarusbank". In December, the government plans to place bonds for individuals worth USD 50 million. The average interest rate for new term deposits in foreign currency for individuals in October was 5.3% per annum.

Thus, if technical issues concerning currency bonds production for individuals are solved, the government could attract certain funds from individuals. Yield of 7% per annum against the background of low interest rates in the banking system could attract financial resources for a relatively long period. Moreover, the government thereby could reduce the foreign debt servicing costs, as the rate would be lower compared with rates on a number of current external borrowings.

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The Belarusian authorities have launched a discussion on the moratorium or abolition of the death penalty under the pressure of Belarusian human rights activists and international community. Apparently, the authorities are interested in monitoring public sentiments and response to the possible abolition of the capital punishment. The introduction of a moratorium on the death penalty would depend on the dynamics in Belarusian-European relations, efforts of the civil society organisations and Western capitals.

In Grodno last week, the possibility of abolishing the death penalty in Belarus or introducing a moratorium was discussed.

The Belarusian authorities are likely to continue to support the death penalty in Belarus. During his rule, President Lukashenka pardoned only one person, and courts sentenced to death more than 400 people since the early 1990s. Over the past year, Belarusian courts sentenced to death several persons and one person was executed.

There are no recent independent polls about people’s attitude about the death penalty in Belarus. Apparently, this issue is not a priority for the population. In many ways, public opinion about the abolition of the death penalty would depend on the tone of the state-owned media reports.

That said, the Belarusian Orthodox Church and the Roman-Catholic Church stand for the abolition of the capital punishment, however their efforts in this regard only limit to public statements about their stance. Simultaneously, the authorities could have influenced public opinion about the death penalty through a focused media campaign in the state media. As they did, for example, with the nuclear power plant construction in Astravets. Initially unpopular project of the NPP construction was broadly promoted in the state media, and eventually, according to independent pollsters, was accepted by most population.