Page 24 - BELRptNov18

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' budget for 2019 will focus more on social matters than in the previous years , Chairman of the House of Representatives of Belarus Vladimir Andreichenko has told the STV channel. “MPs do not treat any matters as secondary. Our consolidated budget for the forthcoming year nears BYN37bn. You know that about 10% of budgetary funds that we used to spend on supporting industrial enterprises will be earmarked for social matters. Next year the social focus of the budget will be even bigger than in the previous years,” Andreichenko said.
6.1.2 Budget dynamics - funding, privatization
Belarus expects to receive the last, seventh, loan tranche from the Russia-led Eurasian Fund for Stabilisation and Development (EFSD) in the first quarter of 2019 , the nation's Finance Minister Maksim Yermolovich said on October 31. In October, the 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, according to the lender. "The control measures that failed were aimed to support small and medium-sized enterprises by issuing a governmental resolution to implement regulatory impact assessment (RIA) of the draft legislation that influences the doing of business; create the institution of a business ombudsman; and stimulate the labour market by speeding up staff optimisation at state-owned enterprises and retraining those dismissed in line with market requirements," the lender said at the time. The key purpose of the indicative measures that have not been fulfilled was to restrain the inflationary pressure exerted by excess money supply, the EFSD added.
24 BELARUS Country Report November 2018 www.intellinews.com