Fitch affirms Belarus’ rating at restricted default

Fitch Ratings has affirmed Belarus's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'RD' (restricted default), Report informs referring to the rating agency’s website.

“Belarus's 'RD' rating reflects the ongoing payment of US dollar Eurobond obligations in local currency, which contravenes bond documentation that does not allow for settlement in alternative currencies,” reads the message.

Over the first nine months of the year, the economy contracted by 4.7% year-on-year. Economic activity has been hit by sanctions, which have been tightened owing to Belarus’s role in the conflict in Ukraine. The pace of decline has eased, suggesting the economy may be starting to adapt, and sanctions-induced import restrictions faced by Russia have created more room for Belarusian products, while the depreciation of the Belarusian rouble against the Russian rouble has enhanced competitiveness.

Fitch expects inflation to remain in double digits through the forecast period.

“Prospects for investment appear poor, structural reforms have been put on hold, skilled workers have left the country and policy settings present risks to macro-financial conditions,” Fitch added.

New price regulations have been put in place in October, but past use of similar policy has been ineffective. Costs of trade reorientation and falling export prices will push the current account into deficit.