• Over the last two years, macroeconomic and financial policies have improved significantly, notably with the adoption of a more flexible exchange rate.
  • Liquidity has recently improved as highlighted by two consecutive upgrades of the short-term political risk rating.
  • The current account deficit has narrowed and the external debt ratios are on a firm downward trend, as are the debt service ratios.
  • Despite vulnerability to exchange rate shocks and contingent liabilities, the public finance risk is acceptable.

In the past, the lack of coherent macroeconomic policies and repeated attempts by the authorities to boost economic activity while delaying needed structural reforms have resulted in large macroeconomic imbalances in a context of weak liquidity and two balance-of-payment crises in 2008 and 2011.

Over the last two years, macroeconomic and financial policies have improved significantly, notably with the adoption of a more flexible exchange rate. Moreover, liquidity has recently improved as highlighted by two consecutive upgrades of the short-term political risk rating (in September 2017 and February 2018). The current account deficit has narrowed and the external debt ratios are on a firm downward trend, as are the debt service ratios. Despite their vulnerability to exchange rate shocks and contingent liabilities, the general government finance risk remains acceptable.

Hence, taking into account these improvements but also the fact that the economy is still in transition and the risky rebalancing strategy towards the West away from Russia, Credendo decided to upgrade the MLT political risk of Belarus to category 6. 

Analyst: Pascaline della Faille – P.dellaFaille@credendo.com