Page 22 - BELRptDec18

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.
Belarus will increase social expenditures from the budget by 10-12% in 2019, Speaker of the House of Representatives Vladimir Andreichenko told BelTA. The government usually announces the launch of socially important facilities ahead of the 7 November holiday. “The tradition has undergone good changes towards concrete action. We launch new schools, roads, and other objects of social importance... Now we are reviewing the 2019 budget bill and are planning to increase the allocations for the social sector, by 10-12%,” Andreichenko said.
6.1.1 Budget dynamics - funding, privatization
Cash-strapped Belarus is going to raise $2bn via Eurobond placements in 2019-2020 , according to a special decree inked last week by the nation's President Alexander Lukashenko. Belarus tapped the international debt market in February 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 11.5% month-on-month, to $6.477bn. According to Minsk's officials, the country expects to receive a $1bn loan from Russia as an inter-governmental loan soon. In October, the Russia-led Eurasian Fund for Stabilisation and Development (EFSD) allocated a $200mn support tranche to Belarus from the lender's $2bn loan agreed with Minsk in 2016. The EFSD's move seems to be purely political, as Belarus has failed to meet benchmarks in five out of 25 indicators (including three control indicators) by the initial deadline of October 1, 2017. Belarus also seeks to raise funds on the Chinese bond market. Minsk has said it might raise up to $300mn-$400mn from the Chinese market . On November 26, the nation's Finance Minister Maksim Yermolovich told journalists that Minsk should repay around $5.4bn of the state debt in 2019-202. "Some of the $5.4bn will be refinanced. In the
22 BELARUS Country Report December 2018 www.intellinews.com