Moody's: Belarus needs $3 bln-$6 bln; rating could be downgraded
MINSK. Aug 23 (Interfax) - International rating agency Moody's estimates that Belarus needs a forex inflow totaling $3 billion-$6 billion in the second half of 2011 "to avoid a further collapse in the local currency and economic output," Moody's said in a sector comment.
Belarus will need an equivalent amount in 2012 to cover projected debt repayment and the current account deficit, Moody's said.
"[F]ailure by the government to secure sufficient external financing in the next few months will likely push the ratings from their current B3 level into the Caa range," it said.
Moody's bases it conclusions on the two most probable scenarios for development of the situation in Belarus. The central scenario would see Belarus raise the $3 billion-$6 billion in the second half and in 2012 and improvement in the market situation to the point that forex can be purchased on the domestic currency exchange.
The source of the foreign loans include the $3 billion loan from the Eurasian Economic Community's (EurAsEC) anti-crisis fund, Minsk's request for a loan from the IMF totaling $3.5 billion-$5.8 billion and privatization revenue.
"This scenario, could lead to a confirmation of the banks' standalone ratings at the current level of B3, which already captures a high degree of credit risk. If confirmed, the ratings would likely carry a negative outlook, however, to capture the uncertainties regarding the government's capacity to fully execute both the privatization initiatives and the conditions of an IMF support program," it says.
"We would expect banks' non-performing loans to increase to 15% of total loans by end-2012, from 3% in 2010. Banking profits would remain marginally positive in 2011 but the banks would likely incur significant losses in 2012. By end-2012, capital adequacy at some banks could fall below the mandatory limit, necessitating additional capital injections of around BYR5 trillion ($1 billion)."
"Under the more pessimistic scenario, Belarus's FX funding would remain insufficient and likely provoke a further, rapid, outflow of FX-denominated customer funding from the banking system. This scenario could materialize if (i) monetary policy is loosened to finance domestic demand, accelerating currently high inflation; (ii) political resistance blocks the realization of privatization sales; or (iii) an agreement with the IMF is not reached," it says.
"This could force the Belarus authorities to impose a deposit freeze or mandatory local-currency conversion to the banks' FX payments. We would also expect asset-quality problems to materialize more rapidly on the banks' balance sheets in 2011, with the level of non-performing loans exceeding 20% by end-2012. The banks' capital adequacy would therefore have to be replenished earlier to remain in compliance with the regulatory requirements in 2011, but the government's ability to do so would be significantly constrained."
"Under the more pessimistic scenario, the risk of default would be materially higher and therefore likely lead to rating downgrades to the Caa range," it says.
Moody's has assigned ratings to six Belarusian banks: state-owned Belarusbank, Belagroprombank, Belinvestbank, BPS Bank (owned by Russian Sberbank), and Moscow-Minsk (a subsidiary of Russian Bank of Moscow); and private-sector MTBank. The six banks account for about 65% of the assets among Belarus' 31 banks.
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