Belarus tapped the international debt market on February 21 for the first time this year with a new $600mn issue of 12-year Eurobond with 6.2% coupon following January's drop in the nation's foreign exchange reserves by $838mn, or 11.5% month-on-month, to $6.477bn.
The country's authorities mandated Citi and RBI as bookrunners. The Development Bank of Belarus, a state-owned government agency, has been appointed as a co-manager.
In June 2017, Belarus placed $1.4bn worth of dual-tranche US dollar-denominated Eurobonds with five-year and ten-year maturities. The yield of the five-year tranche raising $800mn was 7.125%, with the ten-year tranche raising $600mn at 7.625%.
Last year's securities have had a good reception by investors due to the fact that Belarus is considered by them as the so-called "Russian balcony" - Moscow always provides financial support to its neighbour due to political loyalty of Belarusian authoritarian president - which reassures investors that Minsk will avoid default on its debt obligations.
In January, Fitch Ratings upgraded Belarus's Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) to 'B' from 'B-'; the outlook is Stable. According to the agency, the nation's near-term external financing risks have declined due to the pre-financing in 2017 of payments due in 2018 through market and official borrowing, and due to an increase in international reserves.
The net reserve position has improved and remains positive, though Fitch estimates that liquid assets as a share of short-term liabilities (at 53% in 2018) remains the lowest in the 'B' category.
"Foreign currency debt service is $2.6bn (not including Eurobond payment) in 2018, which will be covered by a mix of multilateral financing, local market issuance, use of FC cash buffers and potentially a new international bond issuance," the agency said. "Foreign currency liquidity in the local market and FC government revenues derived from custom duties and trade of oil products further mitigate near-term financing risks."
Belarus' gross external financing requirement (current account deficit plus medium- and long-term amortisations) has declined to 101% of international reserves, from a previous peak of 223% in 2014. Sustained reduction in refinancing risks will depend on continued progress on diversifying external financing sources, refinancing opportunities of Russian bilateral debt and development of the local market, according to Fitch. The next Eurobond amortisation is not until 2023.
Fitch has not factored an International Monetary Fund (IMF) programme into its forecasts. In July, the IMF's deputy spokesman, William Murray, said that negotiations with Belarus over a new support package are "on hold pending clarity on whether there is a high level of support in Belarus for policies, particularly in the state-owned enterprises and utility sectors".