Belarus Does Not Pay Its Debts

Overdue Belarusian debt grew by half a billion dollars on Friday.

The Development Bank of the Republic of Belarus replenished the lists of malicious defaulters. For the same technical reasons as the Ministry of Finance before him.

The Development Bank said it could not pay off buyers of its Eurobonds due to Western sanctions.

This is the debut issue of five-year Eurobonds, which the bank placed in 2019 at a rate of 6.75% per annum. The term of placement of these bonds, when the bank was supposed to return their money to creditors, ended on May 2. And on May 3, the bank announced that it would not return any money to anyone because of the sanctions.

Instead, the bank reported that it “secured the fulfillment of obligations by reserving on 02.05.2024 in the relevant accounts the amount of the principal debt and accumulated interest income… for payments in favour of securities holders.”

That means it has already credited other people's money to its own account. Just like the Ministry of Finance, which has not paid its debts for two years. With the slight difference that the Belarusian Ministry of Finance credited the money due to creditors to a special account in the state-owned Belarusbank in Belarusian rubles.

The Ministry of Finance, however, also did not pay anyone in Belarusian rubles. The Belarusian Ministry of Finance, as they said, has common sense, but money is pitiful. And therefore, the Ministry of Finance has been inventing a mechanism for repayment of debt to Eurobond holders for two years. Only when Russia threatened that it would no longer lend money, the mechanism appeared. However, since that happy moment, the Ministry of Finance has hardly paid more than $100 million with a total debt of about a billion.

"(The Bank) will make payments in the manner prescribed by law, after the approval of the relevant regulatory legal act," the bank said in a statement.

That is, the Development Bank is exactly like the Ministry of Finance. There is common sense, but there is no suitable mechanism. Therefore, the Development Bank said that it will pay when it has a mechanism, or "after the lifting of the sanctions." Given the experience of the Ministry of Finance, in both cases, it seems that we will have to wait about the same.

However, we can’t say that the Development Bank did not have time to get all the necessary mechanisms. The Development Bank knew that it would need to pay its debts on May 2, 2024, five years ago. There was enough time to get their best mechanisms.

But somehow the mechanisms did not start working. Apparently, for the same reason that the Ministry of Finance could not get them for two years.

If we calculate the debts of the Ministry of Finance along with the debts of the Development Bank, we get an amount of $1.5 billion in the region. That is a good savings for the state budget. If you do not pay creditors one and a half billion dollars, you can save on a decent budget surplus.

Such savings, however, cause some damage to reputation. But reputation is an intangible thing.

Yury Andreeu, Belarusians and Market