Page 27 - BELRptFeb19

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.
Belarus is in talks with Russia about a larger loan needed to refinance Belarus debts owed to Russia which could be positive for Belarus market outlook, says Raiffeisen Bank (RZB). Belarus is seeking $1bn in loans from Russia as opposed to the initially proposed $630mn. The government said it also plans to issue bonds on Russian and Chinese capital markets, while no Eurobond placement would take place in 2019. This contrasts with the statement from November when the Finance Ministry said it may issue up to $2bn in US dollar debt during next year. The debt rollover per se implies a smaller drain on Belarus’ international reserves, which would help to maintain stronger international liquidity position in 2019. Notwithstanding good news we maintain a Hold recommendation on Belarus’ Eurobonds owing to tighter valuations vs single B rated peers. According to Belarus’ Finance Minister Maksim Yermolovich the government will have to repay $5.4bn in external foreign debt during 2019-2020, of, which about $2.5bn will be due in 2019. Belarus’ international reserves covered 71% of short-term gross external debt as of October 2018, which, by conventional yardsticks, is relatively low.
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 fulfillment of obligations in 2018. By the end of 2017, Belarus' foreign currency reserves amounted to $7.3bn.
The Russia-led Eurasian Fund for Stabilisation and Development’s (EFSD) has amended a reform programme for Belarus, which is supported by the institution’s financial credit. The amendments concern the conditions of the final, seventh tranche of the credit that needed to be revised because of changes in the schedule of measures to be implemented under the programme as required by the conditions of the first six tranches. In October, the EFSD allocated the sixth $200mn support tranche to cash-strapped Belarus from the lender's $2bn loan agreed with Minsk in 2016. The 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. The approved amendments, specifically, include the revised threshold value for the minimum level of the nation's international reserves was set with the dynamics of this indicator over the first six months of 2018 and the forecast currency flows taken into account and in order to avoid a reduction in gross international reserves below the level necessary to cover two months’ worth of imports. The foreign exchange reserves of Belarus declined by $282mn, or 3.8% month-on-month, to $7.158bn in December, according to the National Bank of Belarus (NBB). The threshold values for monetary indicators were set at the levels necessary to constrain inflation as at the end of 2018 within the 6% target. The requirement that the government adopt a resolution to appraise the regulating effects of draft laws that influence the doing of business, which has not been fulfilled in the framework of the sixth tranche, was reintroduced as a control indicator into the conditions of the seventh tranche, the EFSD said in a statement on January 16. In addition, several requirements that have become irrelevant as of the new control date were excluded from the conditions for the provision of the tranche. These include budget and tariff policy measures fulfilled by the end of 2017, as it was provided for by the Programme. In particular, the government budget in 2017 was implemented with a wide surplus (using the methodology agreed with the EFSD), at 2.3% of GDP, compared to the zero balance envisioned by the programme. Budget expenses for salaries grew by 8.6%, against the required maximum of 9%. The requirement to increase the repayment of public
27 BELARUS Country Report February 2019 www.intellinews.com