On March 1st, Belarus’ Finance Ministry reported, that more than one half of the state currency bonds’ third issue were sold.
Currency bonds are successfully sold to the country’s population. In 2013, Belarus’ public debt payments make circa USD 3 billion. Foreign currency bonds for individuals can become a significant source of debt refinancing, if the secondary market is formed.
In December 2012, Belarus’ Finance Ministry issued two debut bonds for individuals at USD 10 million and USD 40 million for one-year period at 7% pa. As of January 29th, 90.6 per cent of both issues were sold for USD 45.3 million. Inspired by the success, the government and the National Bank decided to place the third issue of bonds worth USD 50 million for 2-year period at 7% pa. The bonds went on sale on January 30th, 2013. On March 1st, 2013 the first two issues were sold in full, and 52.5% of the third issue (USD 26.3 million). The slowdown in sales was driven by the increased repay period for the third issue bonds and by the little time passed since the issue date.
In 2013, Belarus has to repay USD 3 billion foreign debt. USD 700 million will be paid from the state budget, USD 1300 million is planned to be paid from the EurAsEC Anti-Crisis Fund loan, USD 300 million – from the state currency bonds for businesses and individuals. The remaining amount is planned to be paid from Eurobond sales in the international financial markets and from the accumulated budget surplus. At the moment the situation on foreign markets is quite favorable for placing bonds, but this may change in the mid-term.
In 2012 individuals’ deposits in foreign currency in the Belarus’ banking system increased by more than USD 2 billion. There is potential for placement of government foreign currency bonds. However the issue of currency bonds’ secondary trading remains unresolved – this could allow individuals, if necessary, to sell or buy bonds quickly. The distinction between the deposits’ conditions (the possibility of early withdrawal) and bonds would then disappear, increasing the volumes of available public funds.
Thus, if the government opened the secondary market for state foreign currency bonds, it could shift the focus from international borrowing to the domestic market. The population has limited investment opportunities and the possibility of bonds’ quick conversion into cash currency could reduce their fears regarding this investment tool.