Previous Quarterly Editions
*Note: Protest intensity is calculated based on ACLED. **Risk levels are calculated by WTW. Where data are missing no risk level will be displayed. For details of 'anti-austerity' calculations, see the essays in the introduction; for details of 'cost-of-living' calculations, see the previous edition of the Index.
Expropriation Risk: 73 67 67 67 ►Political Violence Risk:66 66 66 57 ▼Terrorism Risk:27 27 27 27 ►Exchange Transfer and Trade Sanction Risk: 73 73 73 73 ►Sovereign Default Risk:74 74 74 65 ▼
TREND ▼
After surpassing the US$42.3 billion mark — an absolute domestic record so far — during 2021, Belarus’ gross external debt subsequently fell below US$42 billion by 2022 and to under US$40 billion by 2023. As of July 2023, the external debt level stood at US$36.8 billion, an equivalent of 48.9% of GDP.
Protest intensity to date* 2022 2023 Low LowUnrest risk in 2024**Cost of living: HighAnti-austerity: High
The 2022 decline of 5.3% was the strongest in recent years, following a modest reduction of 0.2% in 2021 and back-to-back increases of 3.5% and 3.7% in 2020 and 2019, respectively. External public debt is estimated by the Belarusian central bank at approximately US$17 billion, or 23% of GDP.
The main contributor to Belarus’ declining external debt burden has been nothing other than Western sanctions. After the country had been effectively cut off from Western financial markets as of mid-2022, both the government and state-owned enterprises found themselves unable to raise funds as usual.
However, they have continued to pay down foreign debts. In April 2023, Belarus returned to the sovereign debt market by placing US$100 million worth of ruble-denominated bonds with Russian investors.
Belarus’ current levels of indebtedness hardly pose material risks for either regime stability or the broader socio-economic wellbeing of its population, especially insofar as a considerable portion of its debt — whether public or private — is owed to creditors in its key ally, Russia.
TREND ►
Unlike neighboring Russia, Belarus did not go through a painful privatization process in the 1990s and has no stand-alone class of oligarchs. All major enterprises are state-owned, and Belarus’ richest people owe their wealth and position to President Aleksandr Lukashenko.
In 2020, the authorities stopped short of nationalizing Belgazprombank, whose chief executive officer, Viktar Babaryka, had earlier announced his intention to challenge Lukashenko for the presidency. In January 2021, the bank’s board of directors appointed new permanent management.
In January 2023, a law was quietly promulgated to enable Belarus’ Council of Ministers to confiscate property and assets from individuals or businesses that are deemed to have engaged in “hostile actions” towards the Belarusian state. The law does not explain what such actions could look like.
This effectively puts the local assets of any Western business at risk of expropriation. Earlier, in-mid December, Lukashenko publicly threatened withdrawing Western companies with nationalization, without elaborating on the details.
Political Violence Risk
For years, Belarus had been seen as an island of stability in the former Soviet Union — even at the price of disparagingly being called Europe’s “last dictatorship,” thanks to a combination of patrimonialism, a strong security apparatus, pinpoint reforms and continuous financial support from Russia.
All that changed in August 2020 when the Belarus electoral commission certified Lukashenko’s victory, despite allegations of electoral rigging. The election sparked unprecedented nationwide protests that shook the Lukashenko regime to its core but have nonetheless failed to bring it down.
Shortly after, the executive initiated a constitutional reform, approved in a February 2022 referendum held under close police surveillance. The poll was decried by the exiled opposition as a political trick because the redistribution of powers hailed by Lukashenko resulted in greater powers for himself and an extended stay in office.
Amid the continued standoff and Belarus’ support for Russia’s war against Ukraine — Moscow invaded Ukraine in February 2022 — the risk of further political violence remains high, especially if Russia suffers a decisive defeat on the battlefield or experiences political instability of its own.
The risk of terrorism in Belarus is low. The last time the country suffered a terrorist incident was in April 2011, when a bomb attack on a metro station in central Minsk left 15 people dead and 203 injured. Nevertheless, Belarus is known to be a transit hub for individuals who participate in hostilities abroad, for instance in Syria.
In early 2022, Belarus provided its territory to Russia for the attack on Ukraine from the north, but it did not send troops there. Still, cases of sabotage of Belarusian military and industrial infrastructure have been regularly reported. Most notably, on February 26, 2022, a group of guerrilla fighters used drones to attack a Russian early warning and control aircraft stationed at the Machulishchy airbase near the capital Minsk. The aircraft was damaged and later flown back to Russia for repairs.
Following the mass protests against the presidential election of 2020, terrorist designations (numbering over 1,900 as of mid-September 2023) have been routinely used by the Lukashenko regime to crack down on what is left of domestic opposition and to stoke fears of foreign influences to undermine internal stability.
Starting on February 24, 2023, Belarus has been targeted by unprecedented Western sanctions for its support of Russia in its aggression against Ukraine. In particular, the European Union has disconnected five Belarusian banks from the SWIFT messaging system, restricted transactions with the Belarusian central bank and banned the sale of euros to Belarus.
Severe export restrictions followed the first sectoral sanctions imposed by the European Union, United Kingdom, United States and Canada in mid-2021. They targeted the financial services, sovereign debt, insurance and reinsurance, telecommunications, tobacco, petroleum and fertilizser markets. Restrictions against strategic petroleum and potash exports have further deepened Belarus’s dependence on Russia.
In March 2022, the Belarusian central bank hiked its benchmark interest rate to 12%, up from 9.25% since July 2012, in response to Western sanctions against both Belarus and Russia. The rate has since been lowered to 9.5% as inflation fears subsided. From January to June 2023, the official annualized rate of inflation barely reached 3%, staying well below the target rate, which is twice as high.
Amid the sanctions on Russia and a growing list of restrictions against Belarus itself, the Belarusian authorities failed to make a dollar-denominated coupon payment on the 2027 sovereign Eurobond in June 2022. As a result, ratings agency Fitch, and later Standard & Poor’s as well as Moody’s, declared the country to be in default. As of September 2023, Standard & Poor’s withdrew its credit rating for Belarus.
Belarus’ foreign currency and gold reserves have declined from over US$8.5 billion in early February 2022 to less than US$8 billion by September 2023. In November 2022, the Belarusian government said it had received a US$1.6 billion loan from Russia, which in April of that year had already extended by more than a year the repayment of an earlier US$1 billion loan. Belarus’ total outstanding debt to Russia currently exceeds US$10 billion.
Return to contents Next Chapter
