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The state debt of Belarus will break the record. Whether this fear?

Госдолг Беларуси побьет рекорд. Стоит ли этого опасаться?

Next year the state debt of Belarus will grow to a record 54.4 billion rubles. Authorities say that fear is not necessary, as in relation to GDP, this amount is not critical. But there is one important caveat.

Госдолг Беларуси побьет рекорд. Стоит ли этого опасаться?

Photo: Alexander Cvetkovic, TUT.BY

During the year the national debt will grow by 11.5%

The draft budget for next year was seen this week in the house of representatives during the zero reading. It turned out interesting details regarding future obligations of the Treasury. The Ministry of Finance expects public debt (including guaranteed) by the end of this year will rise to 48.8 billion rubles, and in 2020 will reach 54.4 billion rubles.

“Public debt at the end of next year will amount to 54.4 billion rubles. Its growth compared to the year 2019 due to the implementation of a number of capital-intensive projects, including the construction of nuclear power plants, financing projects in the biotechnology Corporation”, — said the Minister of Finance Maxim Ermolovich, speaking in the House of representatives.

The authorities take preventive measures in order to debt quickly increased.

“We have large commercial projects in state-owned enterprises do not implement now under government guarantees,” — said the Prime Minister Sergei Rumas, answering questions from BelaPAN during communication with journalists.

Belarusian authorities believe that the situation with the dynamics of public debt is manageable, and fear of its size for no reason. “The sharp growth of government debt, we do not plan”, — Rumas said, answering the question about the dynamics of public debt until 2025.

In turn, the Minister of Finance has noticed that on October 1, the debt of the state (governance) amounted to 36% of GDP and the threshold value of this indicator (according to IMF methodology) — 50%, i.e. to increase the stock of public debt level is still present.

However, to service and to repay even the existing level of debt the state is not easy due to the large amounts which need to be sent for this purpose.

The repayment of the public debt next year will send nearly 6 billion roubles. Service — about 2.8 billion rubles.

An important caveat — more than 95% of payments on the public debt denominated in foreign currency, there is a significant adjustment of the exchange rate can significantly affect the size of the internal and external obligations of the state.

But now payments on public debt are very serious burden for the Treasury: payments to the debt service account for about 11% of the total expenses of the Republican budget.

Public debt will be sustainable. If you do not have shocks

Debt is considered sustainable if the state is able to repay it and to maintain it without any revision of the terms of borrowing.

Belarusian economists believe that to significantly reduce the size of public debt in the near term (next five years) will not work.

“Opportunities to reduce the level of debt not seen since the economic growth rates remain low and there are no prerequisites to speed them up. Only in case if Russia will give Belarus a significant oil and gas bonuses, government debt may steadily decline,” — said in a comment to BelaPAN senior researcher at the Belarusian economic research and educational centre (outreach) Dzmitry Kruk.

A sharp, uncontrollable growth of public debt also should not happen, experts say.

“The government now says that to attract foreign borrowing to Finance commercial projects in the traditional public sector is not going. Previous experience has shown that this practice is not effective. Accordingly, the preconditions for rapid growth of public debt have not yet seen,” — said in comments to the BelaPAN scientific Director of the IPM Research center Irina Tochitskaya.

According to experts, one of the major debt problems in the medium term may be associated with sources of refinancing of the national debt. By the way, in 2020, the government intends to borrow on the external market of 1.35 billion dollars to repay old debts. It is expected that this problem will be solved by the next issue of Eurobonds.

“Russia has suspended loans to Belarus, and Eurobonds — a fairly expensive tool. Constantly take at 6% per annum on the background of low economic growth the country cannot afford”, convinced tochitsky.

Another problem for sustainability of public debt can be fluctuations in the exchange rate.

“The stability of the Belarusian public debt depends on the situation on the currency market. Since our debt is denominated in foreign currency, a significant exchange rate adjustment, caused by, for example, external shocks, can lead to problems with servicing and repayment of public debt”, says Kruk.

The expert recalled that the IMF has repeatedly pointed out in their reports on this issue.

“To reduce the risk of its implementation, is gradually to transfer foreign currency debt in a rouble. The first steps in this direction are made, the development Bank began to place ruble Eurobonds, but it is desirable to move in this direction to accelerate, to not have the debt problems in the future,” concluded crook.
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