Moody’s downgrades Belarus’ debt rating to default

June 3, BPN. The international rating agency Moody’s downgraded Belarus’ debt rating to C, its lowest rating for debt obligations that are typically in default, with little prospect for recovery of principal or interest.

The agency linked the downgrade to Western sanctions that “are likely to cause a long-lasting damage to the economy and public finances.”

Moody’s analysts expect that sanctions will continue to affect Belarus’ ability “to service its Eurobond obligations over the medium term given the prolonged nature of the Russia-Ukraine war, likely resulting in losses exceeding 65 percent for investors.”

“Belarus will remain in default on its outstanding Eurobonds as long as it supports Russia’s aggression of Ukraine and the sanctions remain in place,” they said.

Moody’s predicted a modest economic recovery with a 0.3 percent GDP growth for 2023 citing the gradual adjustment of the economy to sanctions and rerouting of exports. However, possible new sanctions still create “significant downside risks,” it noted.

In the long term, sanctions will “cause a lasting damage to Belarus’ growth potential,” leading to challenges to businesses, emigration of skilled workers and disruptions in IT and communication sectors, the analysts said. 

Moody’s, along with Fitch and Standard & Poor’s (S&P), is one of the so-called “Big Three” international rating agencies.

Over the past few years, democratic countries have imposed multiple restrictions on Belarus over human rights abuses, alleged vote rigging in the 2020 presidential election, a brutal crackdown on protesters, the forced landing of a Ryanair flight, a migration crisis at the European Union border, as well as support of Russia’s war in Ukraine.