Apr 7, 2022
Belarus Joins Russia Paying Rubles for Its Foreign Debts
(Bloomberg) -- Belarus will switch to servicing foreign debts from international aid banks in local currency after sanctions over its role in the invasion of Ukraine hampered payments.
The government has been driven to using Belarusian rubles to service loans owed to the World Bank, the European Bank for Reconstruction and Development and the Nordic Investment Bank, it said in a statement on its official Telegram channel. The announcement follows President Alexander Lukashenko’s decree in March authorizing the use of the local currency for debt payments.
“This is a forced measure,” the council of ministers said in the statement. “Belarus’ ability to settle its debts in dollars and euros with western creditors is limited because of the sanctions.”
The announcement comes a day after Russia’s Finance Ministry said it would process about $650 million of dollar payments on its bonds using Russian rubles after the U.S. Treasury this week halted dollar debt payments from the country’s accounts. While Russia’s invasion of Ukraine has battered bond markets across the former Soviet Union, Belarus its bonds have been hit hardest due to its direct support for Moscow.
Russian Isolation Chills Debt Market for Ex-Soviet Neighbors
It wasn’t immediately clear if Belarus would use its own currency for all or a part of the payments. Either way, these would be “default scenarios,” according to Cristian Maggio, London-based head of portfolio strategy at Toronto Dominion Bank.
Russia’s key ally borders Ukraine from the north. The Ukrainian military repeatedly reported Russian missile attacks and air raids being launched from Belarusian territory since the war started Feb. 24.
Belarus’s bonds are already among the worst performers this year. The country has $3.25 billion outstanding in five dollar bonds, with the next principal payment due in February next year. The notes were bid at around 15 cents on the dollar on Thursday.
S&P Global Ratings said last month that Belarus could default within a year if things don’t improve soon. A default is also “increasingly likely” in the view of Moody’s Investors Service.
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