Details: Belarusian govt plans to get public debt fully refinanced in 2021
<p> MINSK, Dec 7 - PrimePress. Estimates made by Fitch and the National Bank indicate that Belarus will see its international reserves drop to $6.8 billion in 2021 and $6.2 billion in 2022. </p> <p> </p> <p> According to media reports, in its draft guidelines for the 2021 monetary policy the National Bank also provided for maintaining Belarus’ gold and foreign exchange reserves at no less than $7 billion. The draft says that the reserves at the end of 2021 should not be less than $6 billion. According to the main provisions of the 2020 monetary policy, the country’s gold and foreign exchange reserves should not fall below $7.3 billion by the end of the year. </p> <p> </p> <p> Both the National Bank and Fitch Ratings agree that Belarus’ gold and foreign exchange reserves are expected to fall further in 2021. This trend can be explained, among other things, by restricted access to the international capital market after the August 2020 presidential elections in Belarus. As a result, part of the reserves may be spent on external debt repayment, although the government expects to avoid this and will try to refinance the entire debt. </p> <p> </p> <p> Belarus’ application for the IMF’s COVID-19 alleviation loan has been rejected. In November, it became known that the European Bank for Reconstruction and Development (EBRD) has decided to suspend financing projects in the public sector of Belarus. This format of cooperation with the EBRD was already used from 2011 until 2016, when relations between the EU and Belarus were in crisis after the December 2010 election. </p> <p> </p> <p> What to substitute institutional investors’ funds? </p> <p> </p> <p> It seems that the EBRD’s current move to phase down lending to the public sector will be more painful for the authorities. In recent years, the government has actively substituted budget financing for infrastructure projects with loans from international financial institutions. This has made it possible to maintain the budget’s capital expenditures at a low level and direct funds to priority needs. </p> <p> </p> <p> It is obvious that the problems with financing due to the EBRD’s withdrawal from the public sector will become evident as early as 2021. According to BelaPAN, the Ministry of Finance of Belarus has been tasked to draw up a 2021 budget plan with a deficit, which would not exceed 3% of GDP. At the same time, a preliminary version of the consolidated budget was prepared in autumn, on the assumption that the budget deficit shall stand at </p> <p> 2.7% of GDP, including the republican budget’s deficit of 2.6% of GDP. </p> <p> </p> <p> According to the draft socio-economic development forecast, Belarus' GDP in 2021 will amount to approximately Br157.3 billion. Thus, next year's budget deficit may reach around Br4.7 billion. (In 2020, the Ministry of Finance estimates that the budget deficit will amount to Br2.5-3 billion). </p> <p> </p> <p> It is expected that the budget deficit will expand despite a large-scale abolition of VAT preferences. In November the Government supported the proposals of the Ministry of Finance to curtail VAT benefits, since VAT proceeds are the main source of revenue for the national budget. In particular, according to information from the Republican Union of Industrialists and Entrepreneurs, it is planned to cancel the preferential VAT rates for medicines, medical devices and equipment and to revise the list of food products and goods for children eligible to the 10% VAT. </p> <p> </p> <p> Authorities plan to pay off old debts through further borrowing </p> <p> </p> <p> Also, according to BelaPAN agency, Belarusian authorities plan to refinance all transfers to repay the public debt in 2021, i.e. to attract new borrowings to fulfill the debt obligations. Previously, the authorities tried to stick to the 75%-to-25% proportion - three quarters of the state debt to be refinanced and one quarter to be repaid through foreign currency revenues of the state budget and reserves. </p> <p> </p> <p> According to the September assessment by banki24.by, the external debt due in 2021, excluding trade loans, advance payments and intercompany lending will amount to $5.926 billion. The public administration sector will have to pay off $2.410 billion; the real economy sector – $2.621 billion; banks and non-bank credit and financial organizations – $673 million; the National Bank – $223 million. </p> <p> </p> <p> Sources of debt refinancing for 2021 have not been defined yet, except for the Russian loan, which was agreed upon by the presidents of Belarus and Russia in September 2020. This is a $1 billion loan, which is expected to be provided in Russian rubles. It should be noted that obtaining this loan depends to a large extent on how the political situation in Belarus develops. Moscow expects Alexander Lukashenko to take steps towards constitutional reform, which he is not in a hurry to do. </p> <p> </p> <p> Among other possible sources of borrowing is the international capital market. If western sanctions make it impossible to make a Eurobond placement, then the authorities may try to place bonds on the Chinese market. </p>
2020-12-09
Primepress
MINSK, Dec 7 - PrimePress. Estimates made by Fitch and the National Bank indicate that Belarus will see its international reserves drop to $6.8 billion in 2021 and $6.2 billion in 2022.
According to media reports, in its draft guidelines for the 2021 monetary policy the National Bank also provided for maintaining Belarus’ gold and foreign exchange reserves at no less than $7 billion. The draft says that the reserves at the end of 2021 should not be less than $6 billion. According to the main provisions of the 2020 monetary policy, the country’s gold and foreign exchange reserves should not fall below $7.3 billion by the end of the year.
Both the National Bank and Fitch Ratings agree that Belarus’ gold and foreign exchange reserves are expected to fall further in 2021. This trend can be explained, among other things, by restricted access to the international capital market after the August 2020 presidential elections in Belarus. As a result, part of the reserves may be spent on external debt repayment, although the government expects to avoid this and will try to refinance the entire debt.
Belarus’ application for the IMF’s COVID-19 alleviation loan has been rejected. In November, it became known that the European Bank for Reconstruction and Development (EBRD) has decided to suspend financing projects in the public sector of Belarus. This format of cooperation with the EBRD was already used from 2011 until 2016, when relations between the EU and Belarus were in crisis after the December 2010 election.
What to substitute institutional investors’ funds?
It seems that the EBRD’s current move to phase down lending to the public sector will be more painful for the authorities. In recent years, the government has actively substituted budget financing for infrastructure projects with loans from international financial institutions. This has made it possible to maintain the budget’s capital expenditures at a low level and direct funds to priority needs.
It is obvious that the problems with financing due to the EBRD’s withdrawal from the public sector will become evident as early as 2021. According to BelaPAN, the Ministry of Finance of Belarus has been tasked to draw up a 2021 budget plan with a deficit, which would not exceed 3% of GDP. At the same time, a preliminary version of the consolidated budget was prepared in autumn, on the assumption that the budget deficit shall stand at
2.7% of GDP, including the republican budget’s deficit of 2.6% of GDP.
According to the draft socio-economic development forecast, Belarus' GDP in 2021 will amount to approximately Br157.3 billion. Thus, next year's budget deficit may reach around Br4.7 billion. (In 2020, the Ministry of Finance estimates that the budget deficit will amount to Br2.5-3 billion).
It is expected that the budget deficit will expand despite a large-scale abolition of VAT preferences. In November the Government supported the proposals of the Ministry of Finance to curtail VAT benefits, since VAT proceeds are the main source of revenue for the national budget. In particular, according to information from the Republican Union of Industrialists and Entrepreneurs, it is planned to cancel the preferential VAT rates for medicines, medical devices and equipment and to revise the list of food products and goods for children eligible to the 10% VAT.
Authorities plan to pay off old debts through further borrowing
Also, according to BelaPAN agency, Belarusian authorities plan to refinance all transfers to repay the public debt in 2021, i.e. to attract new borrowings to fulfill the debt obligations. Previously, the authorities tried to stick to the 75%-to-25% proportion - three quarters of the state debt to be refinanced and one quarter to be repaid through foreign currency revenues of the state budget and reserves.
According to the September assessment by banki24.by, the external debt due in 2021, excluding trade loans, advance payments and intercompany lending will amount to $5.926 billion. The public administration sector will have to pay off $2.410 billion; the real economy sector – $2.621 billion; banks and non-bank credit and financial organizations – $673 million; the National Bank – $223 million.
Sources of debt refinancing for 2021 have not been defined yet, except for the Russian loan, which was agreed upon by the presidents of Belarus and Russia in September 2020. This is a $1 billion loan, which is expected to be provided in Russian rubles. It should be noted that obtaining this loan depends to a large extent on how the political situation in Belarus develops. Moscow expects Alexander Lukashenko to take steps towards constitutional reform, which he is not in a hurry to do.
Among other possible sources of borrowing is the international capital market. If western sanctions make it impossible to make a Eurobond placement, then the authorities may try to place bonds on the Chinese market.