Page 18 - BELRptJuly18

6.0 Public Sector 6.1 Budget
The budget is almost in balance. Fitch's measure of general government balance (consolidated government including Social Protection Fund and off balance sheet expenditure related to guarantees and financial sector transfers) is estimated to have recorded a near-balanced position at -0.1% of GDP in 2017. This estimate incorporates a consolidated government surplus of 2.4% of GDP reflecting a combination of revenue growth derived from higher oil prices and a more dynamic economy and continued expenditure restraint.
Fitch expects the general government to record low deficits of 0.8% and 1.2% of GDP in 2018 and 2019, respectively, reflecting lower surpluses at the consolidated level plus potential cost related to the materialisation of guarantees, banking sector capitalisation and the asset clean-up process. We forecast the "augmented deficit", which includes off-budget programme lending - adding to government debt - to be a little higher at 1.8% of GDP in 2018.
Fitch estimates that government debt (including guarantees) rose to 55.7% of GDP at end-2017 , still below the 'B' median. Belarus's debt is highly exposed to currency volatility (90% is FC-denominated), and interest rate risk (50% floating rate). Fitch includes government guarantees, estimated at 10.1% of GDP, in its total debt calculations, due to the high likelihood that the government will need to meet state-owned enterprises' repayment obligations.
6.1.2 Budget dynamics - funding, privatization
Belarus tapped the international debt market on February 21 for the first time this year with a new $600mn issue of 12-year Eurobond with 6.2% coupon following January's drop in the nation's foreign exchange reserves by $838mn, or 11.5% month-on-month, to $6.477bn.
The Development Bank of the Republic of Belarus (DBRB) might float eurobonds as early as 2018 , First Deputy Finance Minister Maksim Yermolovich told reporters on 29 June. The Development Bank has plans to float eurobonds in Belarusian rubles. Maksim Yermolovich said that it might happen as early as this year. There are no plans to float government bonds this year. The Development Bank considered floating an issue of eurobonds in Belarusian rubles to the tune of Br300-500mn.
The Finance Ministry of Belarus hopes to borrow $1bn in international capital markets annually , First Deputy Finance Minister Maksim Yermolovich said. “We will have to refinance the debt of about $1bn annually. The focused efforts to build relationships and to gain access to the international borrowing markets led to positive results. Belarus has gained a guaranteed access to the markets of Europe, the United States and Russia. China will be on this list soon. The Finance Ministry plans to achieve an annual budget surplus of $400 to $700mn in the midterm in order to repay the national debt.
In 2018, Belarus will pay about $3.8bn of debt . Maksim Yermolovich stated that much is done in the country to keep the level of the public debt below 45% of GDP. In 2017, the Finance Ministry implemented an ambitious loan program, including $1.4bn earned from floating Eurobonds, as a result, the national debt increased by $3bn, which created a reserve for the unconditional
18 BELARUS Country Report July 2018 www.intellinews.com