Advantages of foreign credit
By Boris Alexandrov
Belarus’ state debt concerns some Belarusians; as of January 1st, 2011, this amounted to over $12.7bn (up a quarter on 2009) according to the Finance Ministry. Of course, there is no real cause for fear, but Belarusians traditionally have no habit of being in debt. It’s a hard attitude to change.
The Finance Ministry notes that, by early 2011, Belarus’ foreign debt stood at $9,687.2m (accounting for 17.8 percent of GDP), rising 22.8 percent last year. The Government was responsible for $9,486.2m of this amount, while economic entities were responsible for $201m. In fact, the growth of foreign debt in 2010 was not a record; loans in 2008 and 2009 saw state debt rise by 50 percent; debt stood at Br30,449bn (22.3 percent of GDP) by early 2010. In 2009, the country attracted money from the IMF ($3.4bn) and the Russian Government ($500m) while using export credits, including under governmental guarantee, from the banks of China, Germany and Italy. The money was used to finance various investment projects, such as those in the fields of energy, construction materials, wood processing and petrochemistry. The country took loans directly and via acknowledged financial instruments.
Last year, the country also issued Belarusian Eurobonds for the first time. In July, it placed $600m of Eurobonds on the global market for a five year period, at an interest rate of 8.75 percent. The experiment was a success and, in August, an additional $400m of Eurobonds were placed. In late 2010, Belarus borrowed money on the Russian stock market.
A high level of national debt does not necessarily mean that the country’s economic mechanism is facing problems. Most investors point out that India, Brazil and some other states with high national debt are actively growing. The Belarusian Finance Ministry believes that the volume of our state debt will remain at an economically safe level. Our debt portfolio is profitable, with the average interest rate standing at just 3.74 percent per annum, with an average payment period of just over six years. We have time to ‘gather our forces’, allowing us to repay our debt at a later date. Meanwhile, we just pay the annual interest.
Throughout 2011, Belarus is likely to reduce its debt. So far, it plans to attract $1bn (via Eurobonds) and 8bn Russian Roubles (via placement of bonds in Russia), in addition to money from the Eurasia Foundation.