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April 23 – April 29, 2012

The credit outlook of Belarus revised to stable from negative

The situation has not changed
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.

For information

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.

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