It is no secret that in recent years Belarus has been actively borrowing funds, and the external public debt of our country has been growing. How much and to whom Belarus owes and what are the terms for repaying loans?
As First Deputy Finance Minister Vladimir Amarin told the Respublika newspaper, as of October 1, 2009, the external public debt amounted to $6,191.2 million. At the same time, the state debt limit approved by the Law of the Republic of Belarus “On the Republican Budget for 2009” is $8 billion.
As for the structure of external public debt, loans repaid from the republican budget account for 98.1%, or $6,074.1 million 1.9%, or $117.1 million at the expense of borrowers' own funds.
According to Vladimir Amarin, loans from international financial organizations (IMF, IBRD, EBRD) account for 25.2% of external public debt, and foreign government loans for 74.8%.
The largest share in the country's loan portfolio is occupied by loans:
- (50.4%) Russian Federation,
- (24.4%) IMF,
- (12.7%) China.
The external public debt of Belarus this year increased by $1 billion to a record $13.5 billion. The debt burden on the economy, experts say, is constantly growing, and therefore the amounts that the country has to return to creditors every year are measured in billions of dollars. To whom and how much does Belarus owe in 2017?
The main creditors of Belarus
Since 2013, public debt spending has exceeded $3 billion annually, and 2017 will be no exception.
Next year, servicing the public debt will cost 2 billion 496.3 million denominated rubles, and 5 billion 232.2 million denominated rubles will have to be allocated for its repayment. Thus, the total liabilities of the government amount to about 7.7 billion rubles.
In foreign exchange terms (the average annual rate budgeted for 2017 is almost 2 rubles 20 kopecks per dollar), it turns out that in 2017 Belarus will have to repay about $3.5 billion in domestic and foreign public debt.
At the same time, expenditures on internal and external public debt are provided for almost equal: about $1.65 billion will need to be allocated for servicing and repaying the domestic public debt, and $1.86 billion for payments on the external one.
Russia and Belarus approached the next anniversary of their Union in the context of a crisis in bilateral relations. RBC estimated how much it costs Russia to maintain "special relations" with Minsk
Vladimir Putin and Alexander Lukashenko (Photo: Mikhail Klementiev / RIA Novosti / AP)
April 2 marks the 20th anniversary of the Union of Russia and Belarus, but the "fraternal" states meet a round date at the lowest point in their relations for at least the last six to seven years. Belarusian-Russian relations are experiencing "a full-scale complex crisis, which includes both disagreements on specific issues of economic content, and contradictions on fundamental issues of a strategic and military-political nature," the Minsk-based Center for Strategic and Foreign Policy Studies said. Shortly before the anniversary of the Union, in February, Belarusian President Alexander Lukashenko complained that Russia was "kicking the tail and the mane" of the agreements between the two countries, including on the issue of the price of Russian gas. One of the reasons for this behavior of Moscow, according to Lukashenka, is certain forces in the Russian establishment, but not President Vladimir Putin, whom Lukashenka called “his brother” on March 28 (they will meet in St. Petersburg on April 3).
Over $100 billion in 11 years
The Kremlin on the same day when Lukashenka at his big press conference for 15 minutes in a row scolded the Russian authorities, from which it follows that "the Russian side has provided and continues to provide large-scale economic, political and other assistance to Belarus." As an example, the Kremlin press service cited the allocation of more than $6 billion in loans to Minsk in various areas and annual duty-free supplies of oil in the period from 2011 to 2015 in the amount of 18 million to 23 million tons. 3 billion. All this is nothing more than direct and indirect support for our allied Belarusian state,” the statement said.
What is the real extent of Belarus's economic dependence on Russia? “If you look at the figures that the IMF presents, you will see impressive numbers of covert and direct support for the Belarusian economy,” Putin tipped off at a press conference in Bishkek in late February. Indeed, the IMF in September 2016 estimated the total support of the Belarusian economy from Russia at $106 billion for the period 2005-2015 alone, or about $9.7 billion per year ( see infographic). Over the years, the volume of “total net support” from Russia ranged from 11 to 27% of Belarusian GDP, follows from IMF data provided by RBC. But it is clear that in recent years, Russian assistance to the Belarusian economy has been declining, and this may partly explain Lukashenka's recent discontent.
The relationship model can be simplistically described as follows: “financial and economic support is exchanged for a certain degree of political loyalty from Belarus,” says Andreas Schwabe, senior economist at Raiffeisen Bank International for Central and Eastern Europe. “The Belarusian economy is unstable without Russian support. It's amazing how President Lukashenko managed to ensure unceasing Russian support for such a long time, 20-25 years," Shvabe told RBC. But recently, Belarus has been showing signs of “political disloyalty” (does not support the Ukrainian policy of Russia, counter-sanctions), and Russia begins to limit financial and economic support (reduces oil supplies to Belarus, raises gas prices, reduces purchases of Belarusian industrial goods), the economist argues , stipulating that, despite all the differences, the fundamental relations between Russia and Belarus remain "surprisingly stable."
The IMF considers total support to be the sum of two components - implicit subsidies from discounts on Russian energy and net financial support. This results in the broadest assessment, since the IMF financial support includes not only interstate loans, but also the balance of mutual direct investments, as well as loans for Minsk through the Eurasian Fund for Stabilization and Development (EFSD, the former anti-crisis fund of the EurAsEC), whose resources are 88% formed by Russian contributions (at the end of 2015, Minsk owed the fund $1.94 billion, and in 2016 it borrowed another $800 million).
State aid
Such an approach may not be entirely fair if it is the state financial assistance that needs to be assessed, says ACRA analyst Dmitry Kulikov. Among foreign direct investments, there are private ones, they can bring real income when dividends or interest are returned to Russia. In his opinion, it would be reasonable to take into account the debt of Belarus on state loans (including loans from Russian state banks to the Belarusian government) and the amount of accumulated subsidies for oil and gas supplies, and not take into account direct investments.
The debt of Belarus on intergovernmental loans from Russia at the end of 2015 amounted to $6.02 billion, follows from the balance of payments of the union state, available on the website of the Bank of Russia (there is no review for 2016 yet). The Russian Finance Ministry refused to disclose to RBC the current debt of the Belarusian government, and the Belarusian Finance Ministry did not respond to RBC's request. The last time an intergovernmental loan was publicly reported was in July 2015, when Minsk received a $760 million Russian loan. According to Belarus’ balance of payments with Russia for 2016 (available on the website of the Belarusian National Bank), last year the Belarusian government’s net borrowing in Russia amounted to $250 million, but these could have been loans from Russian state-owned banks. Their help is a big channel of Russian injections into the Belarusian economy.
In 2012, Vnesheconombank agreed to provide Belarus with up to $10 billion for the construction of the Belarusian nuclear power plant under an intergovernmental agreement, but so far only the first tranche of $500 million has been allocated (in May 2014), and only $248 million has been selected from it, VEB head Sergei Gorkov said in December . Sberbank lent the state-owned Belaruskali $900 million in 2011 and $550 million in 2015. In general, as of October 1, Russian banks held $4.9 billion worth of assets in Belarus (excluding their liabilities there, $3.7 billion). VEB, Sberbank and Gazprombank did not respond to requests from RBC, and VTB said that the portfolio of loans from its Belarusian subsidiary to local enterprises with state participation is about $ 75 million in terms of Belarusian rubles.
The largest investor
Russia's direct investment (FDI) in the Belarusian economy takes from 57 before 64% total foreign investment in the country, according to the National Bank of Belarus for 2010-2015. At the same time, Russian FDI in Belarus is declining, according to the statistics of the Russian Central Bank (see infographic): net accumulated investment peaked in 2010 ( $5.6 billion), and as of October 1, 2016 they were $3.4 billion.
Official Russian statistics underestimate the volume of investments in Belarus, says the Center for Integration Studies of the Eurasian Development Bank (EDB), which conducts its own monitoring of mutual direct investments in the CIS. If, according to the Central Bank, the amount of accumulated investments from Russia to Belarus in 2015 amounted to $3.6 billion, then EDB monitoring shows the figure $8.3 billion. The Bank, among other things, analyzes corporate reporting and media reports; in addition, unlike the Russian regulator, it takes into account investments through offshores and other “transshipment bases” of capital. The indicator of the Central Bank includes exchange rates, market revaluations and other changes.
Belarus is the leader in Russian incoming investments among the countries of the Eurasian Economic Union. However, this happened mainly due to the purchase by Gazprom of Beltransgaz (now Gazprom Transgaz Belarus), for which the concern spent $5 billion in the period from 2007 to 2011. Other significant Russian projects are investments in the subsidiaries of VEB and MTS, in the main pipeline of Transneft and the Mozyr Oil Refinery.
How much is Russia losing?
According to the IMF, up to 90% of Russia's economic support for Belarus comes from hidden subsidies for the supply of gas, oil and oil products. Sergei Agibalov, head of the Economics and Finance sector at the Institute of Energy and Finance, estimates that the total volume of Russian subsidies to Belarus with preferential energy supplies since the early 2000s amounted to almost $100 billion, or over 200% of Belarusian GDP in 2016. Subsidies for gas in 2001-2016 amounted to $49.4 billion, for oil - $46.9 billion, follows from Agibalov's calculations for RBC. And unlike loans that are returned with interest, oil and gas benefits for Belarus are irretrievable indirect losses of the Russian budget. “This is not money thrown away for us – these are calculated steps based on future results,” Vladimir Putin assured at the end of February.
“All the years of independence, Belarus received gas from Russia on extremely favorable terms - in some years it bought gas many times cheaper than all neighboring European countries,” Agibalov. He calculates the gas benefit as the difference in the price of imports with Germany (this is a comparable large consumer, the price of Russian gas on the border with Germany is published in open sources, and it can be considered a competitive market price, he explains). But in 2016, the gas subsidy dropped sharply to just $350 million from $2.2 billion a year earlier, according to Agibalov's calculations; and the Russian authorities by the end of March 2017 had already counted $ 700 million in debt to Belarus for the supplied gas.
Russia supplies Belarus with crude oil duty-free, and processed oil products are supplied by Belarus abroad with the collection of a duty and its transfer to the Belarusian budget. Subsidies from Russia have recently declined due to the peculiarities of the export duty. The decline in world oil prices leads to a smaller decrease in the price of imports of crude oil that Belarus imports from Russia, compared to a decrease in the prices of oil products that Belarus exports - this is a consequence of the tax maneuver in the Russian oil industry, explains the Eurasian Development Bank. “At high oil prices, Belarus bought it twice as cheap as the market price, and now it’s 25% cheaper,” says Alexander Knobel, director of the Center for International Trade Studies at the RANEPA. - Russia depends on oil and gas, and Belarus in the same way depends on the Russian oil and gas market. If it worsens, then the problems worsen.”
Will Belarus be able to get away from Russia?
Against the background of the reduction of Russian economic support, Minsk is trying to diversify the sources of financial assistance and foreign trade relying on Russia, but this is difficult to do, says Sergey Pukhov, a leading expert at the HSE Development Center. Belarus has been negotiating with the IMF for a potential loan of up to $3 billion since 2015, and the EU sanctions lifted from the country in 2016, in principle, opened up the possibility for loans from the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank.
“In terms of trade, Belarus, of course, is trying to diversify its exports, arrange supplies to the EU countries, does not want to lose the Ukrainian market in any case,” adds Alexander Knobel. “Russia for Belarus is half of trade, the second half is Ukraine, the European Union (mainly Poland and the Baltic states), Russia is the main partner, but Minsk wants to reduce this share and increase its presence in European markets.”
But Andreas Schwabe says that under Lukashenka, Belarus is unlikely to turn its back on Russia. “The West, in exchange for substantial financial support, is likely to demand economic reforms from Minsk, which would weaken Lukashenka’s control over the economy and the state as a whole – and this is unacceptable for him,” the economist argues. Yes, and Russia after 2014 showed with its policy in the post-Soviet space that it would not “allow” Belarus to take such a step.
With the participation of Oleg Makarov
The external debt of the state is absolutely all the obligations of its subjects to foreign creditors. How was the external debt of Belarus formed?
The formation of the country's external public debt began after the collapse of the USSR. The Republic of Belarus, unlike Russia, did not take over the debt obligations of the USSR, so the debt burden on the state's economy during 1996-2006 was very low and amounted to less than 10% of GDP.
In the first half of the 1990s, the state practically did not take loans from the Russian Federation and Europe at all. And in 1996, the President of Russia completely wrote off even those small debts that the country had.
How right? Belarus is the name in Russian. Belarus is the name of the country in Belarusian. The official name is the Republic of Belarus (belor. Republic of Belarus).
Thanks to preferential energy prices provided by the Russian Federation and a rapidly growing market, the Belarusian economy was able to develop without borrowing in the 2000s. According to the Ministry of Finance of Belarus at the beginning of 2007, the external debt was 6.5%.
In 2018, the external public debt of the Republic of Belarus continues to grow and exceeded the mark of 40%. The government has defined a critical maxim, which should not exceed the internal and external public debt - its size is 45% of GDP.
What steps is the Republic of Belarus taking to reduce its external debt?
The increase in accounts payable affects the budget in a bad way. In 2018, it will take over $1 billion to pay interest on loans and another $3 billion to repay loans. The government has worked out steps to cover accounts payable. In the period from 2019 to 2025, it is planned to repay the bulk of the loans.
The cost of repaying loans is included in the country's budget, and refinancing through new loans is also provided.
What is the external debt of Belarus and to whom does the country owe?
The external debt of Belarus today has reached 16.6 billion dollars.
The main creditors are:
- Russia;
- Eurasian Fund for Stabilization and Development (EFSD);
- China;
- Holders of Belarusian Eurobonds;
- The World Bank.
The largest loans of the state of the Republic of Belarus:
- $80,000,000 - EFSD;
- $55,2000,000 - loans from the government and banks of Russia (see);
- $446,000,000 - Chinese banks.
- $93,500,000 - debt to Western partners;
- $95,000,000 - to the World Bank.
Belarus practically does not take loans from the EU and the USA. Belarus does not take loans from the International Monetary Fund, which provides loans on favorable terms.
To pay off the public debt in 2018, 2.5 billion Belarusian rubles will be allocated. Expenditure on repayment of the external debt of the Republic of Belarus in 2018 will amount to 5.4 billion rubles. Accordingly, an amount of 8 billion Belarusian rubles will be repaid. Since 2018, the dynamics of an active reduction in the country's public debt begins.
Belarus' external public debt expenditure in 2018 (USD million)
Interesting: 1 Belarusian ruble = 31.49 Russian rubles (Belarusian rubel; ISO code - BYN, until January 1, 2000 - BYB, from January 1, 2000 to July 1, 2016 - BYR).
Expenses on payments on the external debt of Belarus for 2018:
- $1,007,500,000 - Russia;
- $938,600,000 - to holders of national bonds;
- $563,400,000 - payments to China;
- $475,700,000 - payment to the Eurasian Fund for Stabilization and Development;
- $95,300,000 - payments to the World Bank;
- $4,300,000 - US payment;
- $2,700,000 - SVI payments;
- $2,400,000 - payment by the European Bank for Reconstruction and Development.
The Ministry of Finance is guided by the rule that 75% of the debt is refinanced, and 25% will be paid from non-debt sources.
- The external public debt of the Republic of Belarus for 20 years has increased almost 20 times from $946 million to $16.6 billion.
- Belarus ranks 77th in the ranking of countries in terms of external public debt.
- According to the data for 2018, the external debt per capita of each Belarusian is over $4,000.
The pressure on the budget, caused by the debt load, will continue to grow. In 2018, Belarus must return about 8 billion rubles to creditors. Public debt servicing costs are on the rise and this year will increase by a quarter compared to last year.
How Belarus will pay off its debts
Belarus will allocate 2.54 billion rubles to service the public debt in 2018. According to the authorities, this amount will be about 25% more than the debt burden that the budget carried in 2017 due to the need to pay interest on previously attracted loans.
The cost of repaying the public debt in 2018 will amount to 5.49 billion rubles. Thus, taking into account payments for the repayment and servicing of the state debt, Belarus will have to return about 8 billion rubles to creditors.
Almost all of the country's debt obligations are in foreign currency - the authorities estimate foreign currency payments on public debt in 2018 at $3.8 billion. By the way, the average annual dollar exchange rate, which is budgeted for 2018, is 2.0379 rubles per dollar.
The main payments are related to debt obligations to external creditors. In 2018, payments on external public debt will amount to about $3.1 billion. Belarus must return two-thirds of this money to eastern creditors.
According to information BelaPAN, this year, Belarus must pay Russia (including debt service and repayment) $1 billion 7.5 million, and the Eurasian Fund for Stabilization and Development, which is de facto controlled by the Russian Ministry of Finance, $475.7 million. In addition, 563.4 million dollars will need to be directed to repay loans from Chinese banks.
More than a billion dollars will also have to be paid to Western creditors, including owners of Belarusian Eurobonds - $936.6 million, the World Bank - $95.3 million. It is significant that the International Monetary Fund, which provides cheap financial resources, is not among Belarus' creditors today.
The Ministry of Finance is now guided by a budget rule, the essence of which is that 75% of the principal repayment is refinanced, and 25% is paid from non-debt sources.
In 2018, it is planned to use proceeds from export customs duties on petroleum products ($486.5 million), part of the foreign currency balances (about $1 billion) of the budget formed in connection with the placement of Eurobonds in 2017 to pay off the state debt.
New borrowings will also be attracted to pay off old obligations. In 2018, a new issue on the foreign market of Eurobonds for $600 million is planned, as well as new issues of bonds on the domestic market for $400 million.
In addition, in the first quarter of 2018, as the Minister of Finance Vladimir Amarin answering questions BelaPAN, the Belarusian side expects to receive the last two tranches of the loan from the Eurasian Fund for Stabilization and Development, which is another $400 million.
Thus, in general, it is clear from what sources Belarus will pay to creditors in 2018, but it is completely unclear, experts say, when Belarus' large payments on the state debt will finally begin to decline.
Barrier to economic growth
As of December 1, 2017, according to the latest published data from the Ministry of Finance, the public debt of Belarus was 39% of GDP.
The Ministry of Finance does not rule out that by the end of 2018 this figure may increase to 44.5% (the Minister of Finance spoke about this in December, speaking in Parliament). At the same time, the threshold value of the level of public debt is determined in Belarus at the level of 45%.
Thus, the size of the state debt of Belarus may approach the maximum value in the entire sovereign history of the country.
Experts note that the level of public debt can decrease only if the economy grows faster. Due to GDP growth, the level of debt burden could naturally decrease. In addition, short-term sources would appear in order to pay off old debts.
“In order to speed up the economy, the authorities are trying not to reform the public sector, but to create points for the development of a new, parallel economy. Recent documents (decrees on the development of entrepreneurship and the digitalization of the economy) confirm attempts in this direction.”, - noted the scientific director of the IPM Research Center Irina Tochitskaya.
However, the expert continued, the state has been unsuccessfully trying to create a parallel economy for many years, so there is no certainty that it will be possible to do this now: “Fundamental prerequisites for accelerating the Belarusian economy are not yet visible”.
A similar point of view is shared by foreign experts. According to analysts of the Russian Sberbank, the growth of the Belarusian economy in 2018 will be 2.2%, which will be comparable to the result of last year.
“We do not see factors that could provide significant support for economic acceleration in 2018. According to our estimates, the GDP growth in Belarus at the end of the year will be about 2.2% and will be limited by the accumulated structural problems in the Belarusian economy.”, says a new survey by the Russian Sberbank's Center for Macroeconomic Research.
Experts explain their forecast by the fact that the Belarusian authorities “the issue of the highly inefficient but impressive public sector has not yet been resolved”.
Belarusian economists believe that the country has fallen into a vicious circle: low growth rates do not allow reducing the level of public debt, and a high level of debt burden is an obstacle to economic growth.
“We have been in this trap for several years. The large pressure on the budget associated with payments on public debt leads to underfunding of budget items (education, health care), which form the basis for long-term economic growth., - says the expert of the Belarusian Economic Research and Education Center (BEROC) Dmitry Kruk.
The expert shares the forecasts of many foreign organizations that believe that in the next three to four years the growth of the Belarusian economy will remain low - around 2%.
In the absence of external shocks and the presence of low economic growth rates, the level of public debt can be maintained at the current level (40-45% of GDP) for a long time, the BEROC expert suggests.
“Another thing is that there is no light at the end of the tunnel, which would be expressed in a decrease in the level of public debt, and any external shock (for example, the devaluation of the Russian ruble) can further increase the debt burden on the Belarusian economy, given that the country attracts loans in mostly in foreign currency- summed up Dmitry Kruk.