Possibility of aggravation of political crisis in Belarus remains – Fitch

<p> MINSK, Nov 17 - PrimePress. The political crisis in Belarus is still likely to intensify, Fitch Ratings says in a press release. </p> <p>   </p> <p> As previously reported, on November 13, Fitch revised the outlook for the long-term issuer default rating (IDR) of Belarus in foreign exchange from ‘Stable’ to ‘Negative’ and affirmed the IDR at ‘B.’ </p> <p>   </p> <p> “The revision of the Outlook to Negative reflects Fitch's view that Belarus's post-election political crisis has increased vulnerabilities emanating from relatively low international foreign exchange reserves and a weak banking sector,” Prime quotes Fitch as saying. </p> <p>   </p> <p> In Fitch’s view, there remains potential for an intensification of the political crisis. The political crisis creates risks of renewed social unrest, strikes, additional diplomatic tensions with Western countries and potentially harsher sanctions above those that currently target several government officials including the president. </p> <p>   </p> <p> According to the agency, the official outcome of the August presidential election, which granted President Lukashenko a new term in office, continues to be disputed by the opposition movement and countries such as the US, European Union and UK due to allegations of widespread fraud. There is currently no dialogue between the opposition movement and the government. Large street protests continue demanding the resignation of President Lukashenko, new elections and liberation of political prisoners. President Lukashenko's proposed constitutional reform as a potential mechanism to resolve the crisis has been rejected so far by the opposition movement. </p> <p>   </p> <p> Fitch predicts that global uncertainty associated with the coronavirus pandemic, the impact of volatility in financial markets in Russia due to geopolitical risks or a new intensification of the political crisis may cause further depreciation of the Belarusian national currency. This will have a negative impact on the gold and FX reserves, financial sector stability and public debt. </p> <p>   </p> <p> The political crisis may also increase political pressure on the National Bank of Belarus to support economic growth. Recent statements by the authorities indicating that they may allow for higher inflation, and an extraordinary session on monetary policy, at which the National Bank cut the refinancing rate by 25 pp in June shortly after Lukashenko called on the bank to lower the rate, create uncertainty about the policy direction and risks for improvements in macroeconomic stability achieved through greater coherence between monetary, fiscal and wage policies, Fitch says. </p> <p>   </p> <p> The National Bank has temporarily suspended overnight lending to the banking sector to prevent additional pressure on the exchange rate. The possibility of significant stimulation while maintaining the achieved improvement in macroeconomic stability is limited given the constraints in terms of budget financing and limited opportunities to provide additional monetary stimulus in the context of the ruble depreciation and pressure on liquidity due to political uncertainty. </p> <p>   </p> <p> Fitch does not expect the domestic political crisis to affect bilateral relations with Russia and China, which are the main external creditors of Belarus. The debt attributable to China and Russia (including the Eurasian Fund for Stabilization and Development) accounts for 72% of the state’s external debt and an average of 87% of external debt repayments in 2021-2022. Russian financing in the amount of $1.5 billion reflects a long history of financial support for the neighboring country. Nevertheless, bilateral relations have a history of disagreements on energy and economic integration issues, the agency says. End </p>

2020-11-18

Primepress