Page 46 - BNE_magazine_bne_July2019_20190707

46 I Eastern Europe bne July 2019
In April the IMF warned that Minsk needs a plan B to avoid recession or crisis. ITs got one.
Belarus' Plan B to avoid economic crisis
no compensation this year or next year,” Yermolovich told bne IntelliNews. “But the situation will deteriorate from year to year. In three year’s time we have to be more ready if there is no compensation.”
According to the Belarusian finance ministry, the country’s budget revenue losses from the tax manoeuvre
in 2019 alone were estimated at BYN600mn ($300mn), and the losses might total $2bn by the end of 2024. However, in December, President Alexander Lukashenko’s spokesperson said in a televised interview that Minsk already lost $3.6bn due to Russia's cutting of energy subsidies to Belarus. Due to Moscow's tax manoeuvre Belarus could lose an additional $11bn within the next four years,
the spokesperson added.
The plan is to adjust the amount of sov- ereign debt the government refinances on the international capital markets and to modernise the two refineries: the Mozyr and Naftan refineries can refine 95,000 and 88,000 bbl/d respec- tively and there is a state plan to both increase their capacity and also go up the value chain, says Yermolovich.
“Our plan B is an adjustment of the oil refining strategy,” says Yermolovich who was in London to meet investors. “One way is the modernisation of the oil refineries, to increase their efficiency and switch to more profitable products that are competitive on the European market. Also we can buy crude oil on
Ben Aris in London
The International Monetary Fund (IMF) warned Minsk last Novem- ber that it better have a “Plan B” ready if it could not persuade Moscow to pay it compensation for a change in the way oil exports are taxed that will badly affect the Belarusian budget.
The plan is ready, Belarus Finance Minister Maksim Yermolovich told bne IntelliNews in an interview in London on June 13 and there will be “no crisis” even if Minsk can’t reach an agreement with Moscow over the payment of compensation for Russia’s so called “tax manoeuvre”.
In its hunt for new revenues, the Russian Ministry of Finance will phase out export duties on oil and shift the tax burden over to the mineral extraction tax (MET) over the coming years in a so called “tax manoeuvre”. The upshot is that Russia is effectively scaling back subsidies it has given Minsk, which
has two modern refineries and earns the lion’s share of its foreign exchange earnings from refining Russian crude and exporting it both back to Russia and on to the European Union (EU).
www.bne.eu
While the minister is not anticipating
a crisis and says the government can cope with the change it will nevertheless impact the economy. In April the IMF cut Belarus’s growth outlook in half
as a result of the problems from 3.1% year-on-year to 1.8% y/y.
Minsk has complained loudly about the change, demanding that Moscow pay it compensation for the loss of revenues, but so far these pleas have fallen on deaf
“There will be no crisis this year as the budget was planned to take into account no compensation this year or next year”
ears. Yermolovich told bne IntelliNews that the current budget has been planned assuming no compensation, the tax manoeuvre is still at its opening stage and the pressure on the Belarusian budget will get worse in the next few years, so Minsk is preparing for the worst.
“There will be no crisis this year as the budget was planned to take into account
the European market. There is a already a big programme of modernisation for both refineries.”
The second plank of the plan is to adjust the government’s debt strategy. Under the current budget Belarus plans to use its trade surplus to pay down a quarter of the approximately $2bn of debt that matures this year and refinance the