The cash-strapped Belarusian government has been cut off from the international capital markets after the administration of Belarus' President Alexander Lukashenko falsified the results of the last presidential elections on August 9 and triggered the worst political crisis in 26 years. Minsk now intends to turn to the Russian bond market to raise badly needed cash to finance the budget.

Lukashenko has already received some $1.5bn in debt relief for loans that Minsk owes to leading Russian state-owned corporates. These have been restructured and moved from the company balance sheets to become sovereign debt in order to avoid embarrassing defaults. In addition, the Kremlin has extended a loan of $500mn of cash, but that doesn't cover the $1.4bn the population withdrew in cash from ATMs during the start of the unrest last August. Belarusian residents took out a total of $1.9bn in dollars from banks during 2020, according to the Ministry of Finance.

Lukashenko has met with Russian President Putin several times in the last year to talk about business and support, and the two are due to meet again at the end of May, Kommersant reported. It will be Lukashenko’s third trip to Russia this year. The two leaders will discuss their closer integration, among other issues, the paper reported.

Now Lukashenko intends to ramp up borrowing from Russia by tapping the Russian bond market. He signed off on a decree on May 15 authorising the sale of RUB100bn ($1.35bn) over the next two years.

Minsk has previous tapped the Russian capital markets, which are dominated by the deep pockets of Russia’s state-owned banks.

The money raised from the bond sale will be used to refinance the nation’s foreign debt, which stood at $18.3bn as of February 1, half of which is held by Russia.

As of 1 April, 2021 Belarus' external state debt totalled $18.1bn, down $0.5bn or 2.4% since the beginning of the year, the Belarusian Finance Ministry said on April 30, as cited by BelTA.

In January-March 2021 the Belarusian government borrowed an equivalent of $171.5mn, including $122.7mn from the Russian government, $40.3mn from the International Bank for Reconstruction and Development (IBRD), $8.3mn from the Export-Import Bank of China and $0.2mn from the European Bank for Reconstruction and Development (EBRD) and the Nordic Investment Bank (NIB).

In January-March 2021 Belarus spent $568.7mn on repaying its external state debt, including $242.7mn owed to the Russian government, $189.9mn to Chinese banks, $112.1mn to the EFSD, $22mn to the IBRD, $1.5mn to the EBRD and the NIB, and $0.5mn to the US Commodity Credit Corporation.

This year's state budget has a deficit approaching BYN4bn ($1.54bn), Finance Minister Yuri Seliverstov told BelTA on February 26, which will be partly funded by a Russian loan that will arrive in the second half of this year.

 “We expect that we will receive the second tranche of the Russian loan to the tune of $500mn in H1 2021. It is what we and our colleagues from Russia have agreed on. There are no reasons to believe it will not happen,” the minister said.

A Belarusian-Russian agreement on lending the equivalent of $1bn to Belarus was signed on 21 December, 2020. The Belarusian Finance Ministry received the first tranche of the loan worth $500mn on 30 December. The payment in the second half of this year is the second tranche of that deal.

President Putin agreed to lend Belarus' embattled self-declared President Lukashenko $1.5bn at their meeting in Sochi on September 14. The first $1bn will be lent in 2020-2021 and is split into two tranches. Moscow will provide Minsk with another $500mn through the Eurasian Anti-Crisis Fund sometime in 2021.  

Belarus' gold and foreign currency reserves totalled a record high of $7,468.5mn as of January 1, 2021, according to the preliminary data of the National Bank of the Republic of Belarus. Of that amount, $3,041mn was monetary gold. Overall, the country's international reserve assets decreased by $1.9bn (or 20.5%) in 2020.  

Putin has been pushing Lukashenko to complete a deal to more closely integrate their economies and perhaps create a Rublezone as part of a Union State deal signed in 1999 but never implemented.

Lukashenko has resisted and has been pushing for cheaper energy prices from Russia, a de facto subsidy that allowed the Belarusian strongman to run a neo-Soviet centrally planned economy. Putin wants closer integration first before cutting prices for Belarus, Kommersant reported, as cited by RFE/RL.