State debt up dramatically. Where is Belarusian money going to?

Two years ago President Lukashenka promised to pay off existing debts within 5 years and not to take new loans. The reality was different.

Since then, the public debt of the country has increased by $ 2 billion — from 17 in 2015 to 19 bln as of May 1, 2017.

Public debt is 40% of the total economy.

But the most important thing is the dramatic increase in the cost of servicing these loans. While in 2015, Belarus paid every 25th of the budget rubles to cover interest on government loans, last year it was one in ten. This year, payment of debt interest alone takes 17% of the budget expenditures. As Deputy Prime Minister Vasil Matyusheuski said earlier this year, it is more than Belarus spends on health care, education and the police together.

Now the authorities have to take new loans, not only to pay off the old ones, but also to pay interest. The way out of this Ponzi scheme is to replace the expensive loans with cheap ones. It is done to reduce the payment of interest expenses and start saving for the return of old debts.

Cheap loans are granted by international stabilization funds.

The head of the Eurasian Fund for Stabilization and Development (EFSD), Alisher Mirzoyev, said that the fund is currently considering the possibility to increase the amount of stabilization loan granted to Minsk earlier.

But the conditions for the allocation of cheap credits to pay off the expensive ones is structural reforms. EFSD believes official Minsk is avoiding them. Last year, the EFSD delayed the payment of the third tranche of the loan exactly for this reason. After the political deal of Alyaksandr Lukashenka and Uladzimir Putin, the Fund postponed the execution of these reforms to a later date — until the sixth and seventh tranche. The fourth tranche has been received not so long ago. Negotiations with the International Monetary Fund came to a standstill in 2014.

A press release from the Eurasia Fund commends the efforts of the authorities regarding financial stabilization. However, according to Mirzoyev, without structural reforms this is just a slowing down of negative processes, rather than a reversal trend.

Stanislav Ivashkevich, Minsk, photo: Viktor Drachev / TASS / Forum

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