Page 24 - BELRptFeb19

BYN0.3mn. As of 1 December 2018 arrears on tax and duty payments stood at BYN199.4mn.
Belarus passed its 2019 budget without including compensation for Russian O&G tax maneuvers . The focal point for Minsk now are the negotiations with Moscow about the compensation for the falling fiscal revenues due to changes in taxation regulation in Russia.
Currently Belarus buys the agreed volume of crude oil from Russia effectively without having to pay excise duties (although the exact setup is more complicated). However, in 2019, Moscow decided to cut the rate of duties on crude oil and simultaneously increase mineral extraction tax (MET).
Therefore, the price for Belarus would increase. Officials’ estimate that it would loose the equivalent of $300mn of fiscal revenues in 2019, and the effect would increase further as the Russian tax maneuver proceeded: the ultimate goal is to zero out export duty on crude oil.
Minsk has been complaining bitterly and the uncertainty regarding the outcome of negotiations was the key reason for the relatively late submission of the budget’s draft, as usually next year’s fiscal plan would have been agreed earlier. It also implies that numbers could change as Presidents Putin and Lukashenko have scheduled a meeting in the last week of December to discuss the matter.
Belarus’s draft budget assumes no compensation from Russia among the revenue items. On the other hand, there is a planned BYN616mn ($290mn equivalent) increase of the government’s cash balances next year, so analysts believe that if sides agree on compensation it would be channeled to President’s Fund.
On the macro side, the budget was drafted on the assumption of a 2.1% GDP growth, a 5.3% average CPI and a USDBYN exchange rates of 2.216. The oil price assumption was $60/bbl.
Also, there were some structural changes to the fiscal items. To recap, starting from 2018, MinFin started disclosing the planned flows of budgetary lending as a part of its financing article. Previously, budgetary lending was regarded by the law as a part of expenditures (although its actual distribution was disclosed separately, and was impossible to benchmark it against the planned numbers). For this year, MinFin apparently, also included the financing flows attached to the construction of the nuclear plant (funded by a loan from Russia) was in the budget’s numbers as well.
Previously, it was accounted separately from the general fiscal framework, which raised significant criticism from the IMF. Hence, this year, Belarus plans to source an additional $2.5bn of funding from external counterparts, which would be channeled to final borrowers in the form of budget loans. We have excluded these items from our fiscal numbers.
As usual, the budget is planned with a visible surplus (BYN1.7bn this year), which would be used mostly for debt servicing purposes. Meanwhile, it is also common that actual surplus numbers exceed the plan. Specifically, in 2017, the budget law assumed the surplus at BYN1.5bn vs. the actual BYN 2.8bn. The surplus for the first nine months of this year is running at BYN 3.4bn vs.
24 BELARUS Country Report February 2019 www.intellinews.com