Standard and Poor's cuts Belarus closer to default risk

26th September 2011, Comments 0 comments

Standard and Poor's on Monday downgraded Belarus' debt rating to 'B-/C' from 'B/B' with a negative outlook, bringing the ex-Soviet nation one step closer to being deemed vulnerable to default.

"The downgrade reflects our concerns over Belarus' ongoing dependence on external funding," Standard and Poor's said in statement. "We remain highly uncertain as to Belarus' ability to secure such funding."

The downgrade was the second since May, when the government was forced to accept a 36-percent currency devaluation that came on the back of a dire shortage of state cash reserves.

Belarus loosened its currency one more time this month, introducing limited free market trading in a move that has now devalued the local ruble by some 60 percent in five months.

The authoritarian regime of President Alexander Lukashenko has appealed to the International Monetary Fund for help and has received low-interests loans from China and a group of ex-Soviet states led by Russia.

But the New York-based agency said it was worried by the government's continued dependence on foreign funding and "very low level of usable reserves.

"We remain highly uncertain as to Belarus' ability to secure such funding, and we believe the government has made only limited efforts so far to remedy the underlying causes of the external imbalances," Standard and Poor's said.

It added that the two waves of currency devaluation will come as a blow to the government's foreign currency debt, which the agency said would nearly double to more than 40 percent of gross domestic product by the start of 2012.

© 2011 AFP

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