Bail out requested from Russia will not cover Belarus needs during elections year

In 2015, Belarus has to repay a sizable amount of her public debt; she therefore has requested a loan from Russia. A USD 2.5 billion Russian loan will be insufficient to cover Belarus’ outstanding debt and enable her to ensure financial stability in the election year; meanwhile, Russia currently cannot afford issuing a larger loan for her ally.

In 2015, Belarus’ public debt repayment obligations will constitute circa USD 4 billion. In December 2014, the National Bank managed to raise an additional USD 1 billion loan with repayment due in 2015. As of February 1st, Belarus’ international reserves totalled USD 4.7 billion. Over the past six months, the reserves have reduced by USD 1.5 billion, which indicates that Belarus will be unable to service her public debt without raising additional funds. The ongoing international markets’ situation is not favourable for placing Belarus’ Eurobonds issues and the domestic market simply does not have the required amount.

Belarus has found a partial solution for this problem – she will place a new issue of governmental bonds on the Moscow Stock Exchange to be redeemed by the Russian National Wealth Fund. In 2014, a similar scheme involved Russian VTB Bank, which provided a short-term bridge loan, which was later repaid from the intergovernmental loan. In addition, Belarus might still receive the sixth tranche of the EurAsEC Anti-Crisis Fund totalling USD 440 million.

In 2015, Belarus will keep the export duties on oil products in her budget. Initially, such proceeds were estimated at circa USD 1.5 billion. That said, the potential USD 2.5 billion loan from Russia could solve the problem with servicing public debt in 2015. However, the sharp fall in oil prices in late 2014 – early 2015 might substantially reduce the volume of Belarus’ proceeds from export duties on oil products.

The devaluation of the Belarusian rouble was inadequate to change the international trade situation. International trade deficit will remain regardless of the restrictive import measures. In addition, the situation on the Russian market has not improved for Belarusian goods, excluding any sales growth potential.

The situation on the domestic foreign exchange is challenging too. In January 2015, the population, fearing for their currency deposits withdrew more than USD 150 million from the banking system.

All in all, Belarus requires circa USD 4-5 billion in order to service her international and domestic debts. It is a substantial amount for Russia and she may not consider allocating it on terms acceptable for Belarus.

When the Belarusian authorities requested a bail out from Russia, they have recognised their inability to service the public debt in 2015 independently. The requested amount is not sufficient to address all economic misbalances, however, due to the difficult financial situation Russia will not allocate a larger amount on terms acceptable for Belarus.