Belarus: Belarusian ruble continues to plummet as credit default risk looms
The Belarusian ruble continued to lose ground against the U.S. dollar over the past month, plummeting to an all-time low of 3.33 per USD in mid-March, amid a spiraling sovereign debt crisis due to the fallout from the Russia-Ukraine war. On 1 April, the currency traded at BYN 3.26 per USD, which marked an 8.3% depreciation from the same day last month. Moreover, the Belarusian ruble lost 21.5% of its value year-to-date and was down 19.0% in year-on-year terms.
The Belarusian ruble followed its Russian counterpart’s collapse in the days following Russia’s invasion of Ukraine, as some of the international sanctions rolled out against Russia were also extended to Belarus. These measures affect the country’s economic perspectives, and spell trouble for the Russia-dependent external sector in particular. Notably, while the Russian ruble has largely recovered lost ground over the past month—thanks to draconian capital and foreign exchange controls, and unprecedented monetary policy tightening—the Belarusian currency continued on a downward trajectory on rising fears of sovereign debt default. The Belarusian economy is seen as far more vulnerable than Russia’s, with its debt-to-GDP ratio more than double that of its main economic and political ally.
Against the backdrop of evaporating investor confidence and bleak macro-financial perspectives, all three major credit rating agencies cut Belarus’ long-term ratings over the past several weeks. On 4 March, S&P Global downgraded its sovereign credit ratings to ‘CCC’ from ‘B’; on 7 March, Fitch Ratings downgraded ratings to ‘CCC’ from ‘B’; on 10 March, Moody’s lowered ratings to ‘Ca’ from ‘B3’ with a negative outlook. As a result, the Belarusian ruble continued to plummet in recent weeks as investors braced for a likely default in the coming months.
Commenting on its decision to slash credit ratings, analysts at Moody’s said:
“The downgrade reflects the weakening of Belarus’s credit profile amid Russia’s (‘Ca’ negative) ongoing military invasion in Ukraine (‘Caa2’ review for downgrade). Belarus is directly exposed to a significant further tightening of sanctions targeting key economic sectors and the financial system that will hamper the country’s already narrow external buffers and jeopardize its capacity to service its debt. The country’s external position will be further exposed as will its macroeconomic and financial stability. In Moody’s view, a default by Belarus has become increasingly likely given concerns around the government’s willingness to repay its debt obligations and expectations that any potential financial support coming from Russia will unlikely be used for that purpose.”