Belarus has since spring this year announced that it was intending to pay its foreign debt obligations in its national currency; however, only last week was such a payment registered as Belarus made its Eurobond payment in Belarusian rubles.

On July 7, Fitch Ratings announced that it would downgrade Belarus’ long-term foreign currency issuer default rating (LTFC IDR) from CCC to RD (restricted default) if Belarus did not manage to make its next Eurobond payments under the original terms, i.e. in US dollars.

On July 18, Fitch Ratings downgraded Belarus’ LTFC IDR to RD; however, the LTFC IDR could be upgraded if Fitch judges that Belarus has normalised relations with international creditors through commercial debt restructuring or resumption of payments under the original terms.

Additionally, Fitch has withdrawn its ratings sand analyses for the three Belarusian insurance companies, “Belarusian National Reinsurance Organisation”, “Belgosstrakh” and “Export-Import Insurance Company”, citing insufficient information about the companies as the reason.

While Moody’s also agreed that Belarus’ inability to meet the Eurobond payments in US dollars by July 14 constituted a default, it left its rating at CCC. S&P Global Ratings said on July 15 that while it would keep Belarus on a negative credit watch (CC), it understood that the Belarusian authorities are seeking ways to pay the bonds in US dollars.

In a response to Moody’s decision to declare Belarus in default, Belarusian state media published an article with statements from Belarus’ Finance Ministry, which was notably upset with the decision.

Belarus’ Finance Ministry emphasised that it considers the “right of Eurobond holders to get payments” to be key, and that it’s currently working on making the payments in US dollars as stipulated by a decree from the country’s government as well as from a resolution by the Belarusian National Bank.

Nevertheless, the Finance Ministry noted that meeting the payments in US dollars was hard due to the rapidly changing foreign political conditions, as well as the increasing sanctions pressure.

Belarus’ problem is thus not that it doesn’t have the money, but rather that it can’t pay its debt in US dollars due to sanctions. The next months of this year will be key to see whether its Finance Ministry manages to solve the issue, otherwise more companies will choose to downgrade Belarus’ credit rating to default.