Belarus has no plans to attract new loans

Belarus has no plans to attract new foreign loans on market terms. New external loans will be linked with the refinancing of the accumulated foreign debt and financing of large investment projects. In the meanwhile, external debt payments will put a downward pressure on the international reserves and on the Belarusian ruble exchange rate.

Belarus’ Finance Minister Andrei Kharkovets on June 21 announced that the Finance Ministry was against new external borrowings. The minister said that currently there were unfavourable borrowing conditions on the international financial markets for all countries, including Belarus. Thus, according to Cbonds, on June 21, 2012 the effective yield of Belarus Eurobonds maturing in 2015 was 10.06%. For comparison: on June 21, Ukraine’s Eurobonds maturing in 2021 yield was 9.84%, Hungarian maturing in 2020 – 6.65%, Russian maturing in 2030 – 3.96%, Polish maturing in 2019 – 3.38%, Mexican maturing in 2020 – 2.63%.

Today investors assess Belarusian risks as the highest, after Argentina and Venezuela among developing countries – Eurobond market players.

Mr. Harkovets said placement of new Eurobonds could become feasible in 2013, depending on the situation on international financial markets. He said Belarus planned to issue Eurobonds if yield on the securities was not higher than previous issues. Currently, there are two outstanding Eurobonds issues: one maturing on August 3, 2015 for USD 1 billion (coupon rate is 8.75%) and second maturing on January 26, 2018 for USD 800 million (8.95%).

In 2011-2012 Belarus has paid off to investors their coupon yeild on the two Eurobond issues totaling USD 202.9 million. Future coupon yield payments on Eurobonds in Belarus will be on July 26, 2012 for the Eurobonds’ second issue (USD 35.8 million), and on August 3, 2012 for the First issue of Eurobonds (USD 43.75 million).

In turn, on June 21^st Belarus’ first issue bonds in Russian rubles maturing on December 20, 2012 (RUR 7 billion, USD 1 = RUR 33.5191) were traded with 12.38 % yield (purchase) and 11.64% (sale). Therefore placement of new bonds issues on the Russian market is unwise.

Also on June 21^st Belarusian government paid off the sixth coupon yield (RUR 151.83 million) to holders of two-year bonds placed on the Russian financial market on December 23^rd, 2010. As a result, the total amount of coupon payments on the first bond issue in Russian rubles totaled RUR 910.98 million.

Moreover, in May 2012 the Government of Belarus paid off interest and fees on the IMF loan, amounting to USD 18.268 million. The overall repayment and servicing of the IMF standby loan in February 2009 – May 2012 was USD 303.6 million (see Table 1). The balance of the outstanding payments on the IMF principal loan has decreased from USD 3.484 billion on January 1^st, 2012 to USD 3.321 billion on June 1^st (taking into account the USD/SDR exchange rate fluctuations).

Table 1

Belarus’ payments to repay and service the IMF loan in 2009-2012.

Figure 1. Belarus’ overall external debt dynamics in 2000-2012, mln. USD

(Factual data and polynomial trend)

According to the National Bank, Belarus’ overall external debt in Q1 2012 decreased by 0.9% to USD 33.727 billion on April 1^st (see Figure 1) making 80.1% of annual GDP.

The gross external debt structure in Belarus economy as of April 1^st, 2012 is as follows: public administration – USD 12.458 billion (on May 1^st, USD 13.440 billion, taking into account government’s guarantees), monetary control authorities – USD 1.402 billion (on June 1^st, USD 1.417 billion); banks –USD 5.983 billion (on June 1^st, USD 5.624 billion), enterprises – USD 12.840 billion, direct investment within the framework of inter-company loans – USD 1.044 billion.

According to our estimates, payments by Belarusian residents for servicing and repayment of the overall external debt (including principal repayments and interest), will total USD 16.6 billion in April 2012 – March 2013 (including refinancing and prolongation of external loans). External debt payments will put a downward pressure on the international reserves and on the Belarusian ruble exchange rate, and, as well, will slowdown the economic growth in Belarus.