The international rating agency Fitch recently confirmed the credit rating of Belarus as a high-risk, but the short-term prospects were scored as positive. This means that the rating may be revised upwards in the foreseeable future — from 15th place of the Fitch scale to 14th.
First of all, it is about energy resources, recovery of Eurasian tranches’ payments and active talks on a new loan directly from Russia. The agency specifies, however, that the forecast is short-term. In other words, Minsk, in their opinion, will be able to pay off the debts in the next year or two, thanks to an opportunity to get new ones.
Long-term prospects of the rising debt pyramid have raised concerns even with members of the Belarusian government. Over the past three years, relative to the size of the economy, the total government debt has almost doubled and now stands at almost half of the GDP — twice the annual income of the republican budget.
Officials sounding alarm
At the Council of Ministers’ meeting last month, the Ministry of Finance and the State Control Committee warned that the debt burden cannot be increased further.
There are countries with a much higher share of the national debt
Germany owes 70% of its GDP, while Japan’s debt exceeds half of its economy. But, says the former chairman of the National Bank of Belarus Stanislau Bahdankevich, a country’s creditworthiness is evaluated not by its debt, but by how much it pays to service it. Interest on the debt should not exceed economic growth, otherwise the debt load becomes a burden which pulls it to the bottom.
Economies of Germany or Japan are growing much faster than the Belarusian one and often they pay no interest on their government loans whatsoever. It is them who are paid extra for the preservation of other people’s money. Interest charged on loans in Belarus, on the contrary, are by far higher than the growth of its economy.
As a result, while as recently as last year our country spent only 5% of the national budget on interest payments, last year it was already 10%, and in the first quarter of this year — 17% of all expenditures of the state budget.
Stanislau Ivashkevich, “Belsat”, photo: Viktor Drachev / TASS / Forum
