By Aleś Hudzija
Although bank loans to companies rose sharply in 2023, the reported proportion of bad debts remains low. State-owned businesses have shifted part of their burden to the government.
Lending on the rise
In 2023, bank loans to companies rose by 28 percent to 131.5 billion rubels ($41 billion), while the overall corporate debt climbed by 16 percent. With annual inflation at 5.8 percent, the debt burden on businesses has increased.
Bank loans issued to companies in rubels and foreign currency, million rubels
Sanctions are nothing new, but their tightening after 2020, especially with the introduction of financial restrictions in 2022, has exposed companies to new risks.
Belarusian companies are finding it difficult not only to deliver and sell their goods, but also to receive payments.
While it is still easy to conduct transactions involving Russian financial institutions, doing business in other countries of the Commonwealth of Independent States (CIS), and even more so in the West, has become increasingly difficult, costly and risky.
Higher risks, prices of raw materials, labor and logistics costs force Belarusian companies to rely heavily on credit. Under normal conditions, borrowing helps companies boost production and increase sales. However, in the current circumstances, businesses borrow to cover additional costs.
Manufacturers and traders are main debtors
The credit burden is unevenly distributed across the economy, with manufacturing and trade accounting for about two thirds in 2023. Lending to the manufacturing sector increased by 18 percent last year from 47.2 billion rubels to 55.6 billion rubels and trade, by 40 percent from 38.1 billion to 53.3 billion rubels.
Breakdown by sectors, million rubels
Agriculture (blue)
Manufacturing industry (blue-green)
Trade (Red)
Loans to farms grew by 54 percent and to information and communications companies, by 82 percent. The sharpest increase was reported in healthcare, from 60 million rubels in 2022 to 246 million rubels in 2023.
The proportion of bad debts remained low, rising from 0.32 at the start of 2023 to 0.41 percent at the end of it for loans in the national currency.
The bad foreign currency debt contracted from 0.15 to 0.14 percent.
However, the real volume of bad debts is probably much higher. Many state-owned companies, directly or indirectly, shift their burden to the government, obtaining loans on preferential terms making the government repay part of the interest.
Russian rubles substitute for dollars and euros
Loans in dollars and euros sharply decreased since the start of the Russian full-scale war against Ukraine in March 2022. Loans in Russian rubles have grown significantly.
Bank loans to companies in rubels and foreign currency, million rubels
Belarusian rubel, mln; US dollar, mln; euro, mln; Russian ruble, mln
Nevertheless, Minsk could not completely avoid transactions in dollars and euros. Despite claims by Belarusian officials that the dollar would collapse, foreign partners still consider the US currency and the euro as stable means of payment.
The Chinese yuan has been playing a bigger role in the Belarusian economy. Although it does not have as big influence as in the Russian economy, it has a significant potential, but the realization of this potential will not add stability and strength to the Belarusian economy.
Debts must be repaid
Last year’s lending expansion was driven by easy access to credit and extremely low interest rates. In many ways, it was made possible by Russian loans for import-substitution projects.
Although Minsk has access to Russian loans, the strategy of filling niches in the Russian market with Belarusian goods is questionable.
Sooner or later, Belarusian companies will face sales problems as demand declines in Russia and also due to the lack of domestic demand for military goods.
Belarusian consumer goods manufacturers face tight competition from Chinese counterparts in Russia.
In any case, credit risks lie entirely with Belarus. The lending expansion shifts the problems of the national economy to the future – the strategy is to hold out for a day. Sooner or later the problems can multiply, and the government will find it very difficult to come up with effective economic solutions.