Burak T. V., Shikulo O.S., scientific leader Martinovich V. G.

Polessky State University, Pinsk

External debt of the Republic of Belarus

Public debt development is viewed as a main indicator of debt sustainability in developed economies, while gross external debt is paid more attention to emerging market economies. The main objective of foreigh loans is to implement effective investment projects aimed primarily at improving the competitiveness of the economy and its export potential.

There is no uniform parameter of a safe level of public external debt for all countries. Thus, the Treaty on the European Union stipulates that the debt in the EU member country should not exceed 60% of GDP. The figure within EurAsEC is set at of 80% of GDP. The agreement on harmonized macroeconomic policy in the Customs Union between the Republic of Belarus, the Republic Kazakhstan and the Russian Federation has this figure at 50% of GDP [2].

The Republic of Belarus has stricter requirements to the level of public debt. Thus, in accordance with the socio-economic development program for 2011-2015, the ratio of public debt to GDP must not exceed 4%, and the ratio of external debt to GDP 25%.

Belarus gross external debt has recently exceeded the threshold of 55% of GDP set by the national security concept. After the first January of 2012 it was equal to 62,7% of GDP. Ministry of Economy expects its increase up to 85% by the 2016, because in 2013-2015 the Republic of Belarus expects a tense schedule of payments on the external public debt payments due to the repayment of the IMF standby loan and the debut Eurobond issue due to mature in 2015. In general, in the next three years Belarus will need to pay approximately $5.5 billion.

The picture - The gross external debt per capita for the years 2007-2012, dollars

It is far beyond both the officially set threshold and the world-wide accepted critical level of 60% of GDP. So, there is a real risk of Belarus gross external debt unsustainability, but the scale of this risk should be verified by other indicators. For instance, gross external debt to exports ratio is still below the safety threshold. It was 65,9% as of first January of 2011 and is forecast to exceed the 100% level only in 2014. In other words, Belarus opportunities to service gross external debt may be a bit better than the debt to GDP ratio alone signals.

More insight is given by indicators that compare short-term external debt and international reserves. Reserves cover less than 30% of short-term debt, which makes Belarus subject to liquidity constraints. It is result of traditionally low level of reserves and fixed exchange rate regime that frequently demanded foreign exchange interventions.

In the year under review, the share of long-term liabilities in the structure of gross external debt increased by 2.2 percentage points (from 55.3% to 57.5%), that was due to the growth of the banks’ and non-financial sector’s long-term debt.

Thus, taking international practice into account, the “burden” of public external debt of the Republic of Belarus is considered moderate.

At 2013-2015 the Republic of Belarus expects a tense schedul of payments on the external public debt payments due to the repayment of the IMF standby loan and the debut Eurobond issue due to mature in 2015. In general, in the next three years Belarus will need to pay approximately $ 5.5 billion.

The Finance Ministry of the Republic of Belarus sees no major problems with payments for the external debt at peak times. According to the view of Minister of the Economy Belarus has enough resources and tools to comfortably survive these periods [2].

Literature:

1. Economy of Belarus, № 1, 2012.

2. Financial stability in the Republic of Belarus, 2012.