(2015 (estimate), %)

Budget Sustainability Policies in the
Republic of Belarus
Elena Pechen,
Director, Chief Directorate of Budget Policies,
Ministry of Finance, Republic of Belarus
February 2016
Background
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


Form of Government: presidential republic
Population: 9.5 million people (men – 46.5%, women – 53.5%; urban residents – 77.3%, rural
population – 22.7%)
Capital: Minsk – 1.9 million people
State Languages: Byelorussian, Russian
Open, export-oriented economy: Belarus sells its goods in the markets of 161 countries
Key trading partners in 2015: Russia – 48.3% 48.3% of total trade, EU countries – 25.3%, other
countries– 26.4%
Belarus Economy
Currency
Byelorussian Rouble (BYR)
GDP
US$76.2 billion (2014), per capita- US$6,600 (2014)
GDP growth rate
101.7%(2012), 101.0%(2013), 101.7% (2014), 96.1% (2015, projected)
Inflation
(percentage change on previous
year)
59.2% (2012), 18.3% (2013), 18.1% (2014), 13.5% (2015 projections)
Human Capital Development Index
High Level Development Group of Countries- 0.798
(50th position in global ranking)
International Comparisons
Centralization Rate (central government budget
as % of GDP)
GDP per capita (US$ thousand)
Б&Г
Украина
Албания
70
58.4
60
53.6 52
50.1 50
46.4 44.6
50
40.6 40.3 38.8 37.5
35.6 34.1 33.5
40
30.9
17.7
30
14.3 13.7 12.7
11.0
20
8.4 6.6 6.6
3.5 2.1
1.2 10
0
Россия
41.3
Беларусь
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
National Debt as of the end of 2014, % of GDP
The World Bank Doing Business Rankings (June 2015)
Германия
Lithuania
Latvia
Poland
Armenia
Kazakhstan
Belarus
Russia
Greece
Kirgiz Rep
Ukraine
Greece
15
France
20
22
25
51
60
Poland
50
Lithuania
41.1
80
22.3
Russia
83
60
68
Belarus
67
40
75
Ukraine
41
44
20
95
Germany
35
0
177
100
Maastricht Criterion – 60%
11
0
50
100
150
200
Social and Economic Development Priorities
in the Budget Sector
1. Maintenance of optimal tax burden for the economy
2. Tax policy harmonization in EEU countries
3. Support of sustainable and well-balanced republican and local budgets through
financing of expenditures within the available limits of revenues and sources of
funding for budget shortfall (surplus)
4.Reduction of external national debt and improvement of government debt
management efficiency while retaining its size, structure and debt servicing and
repayment at safe levels to exclude excessive pressures.
5. Keeping the social sector of budget expenditures in place, prioritizing health
and education sectors aimed at the improvement of health indicators and further
development of education process.
4
Background for Introduction of Budget Rules
1. Establishment of stable environment for businesses, with regard to aggravating
external economic factors
2. Promotion of investment opportunities of the economy and support of stability
of its tax legislation.
3. Government guarantees of the minimal social service standards to the citizens,
retention of social sector in budget spending
4. The time for peak in the national debt repayments, significant pressure on the
budget to support the national debt repayment and servicing
5. Debt instability of individual local budgets providing a negative impact on
macroeconomic balance
5
Consolidated Budget Revenues
Revenues (2015 (estimate), %)
Revenues (2016 (approved), %)
Other
revenues1
2.5%
Other
revenues
13.2%
VAT
27.9%
Non-tqx
receipts15.3
%
Non-tqx
receipts
14.1%
VAT
29.2%
Excise
7.2%
Excise
7.4%
Personal
income tax
14.4%
Profit tax
7.8%
Profit tax
7.9%
Foreign
Trade
Revenues
14.1%
Foreign Trade
revenues
14.4 %
Personal
income tax
14.6%
Amount of Revenues in 2016:
288.9 trillion BYR
($12.7 billion)
6
Rule 1: not to increase the tax burden
Tax burden (% of GDP)
27.3
26
25,4
24.7
2010
2011
24,3
2012
2013
2014
24.8
24.7
2015
(оценка)
2016
(утверждено)
Key inputs of tax burden:
– Profit Tax (18%)
– VAT (20%, 0% on exports)
– Property Tax (1-2.5 %)
– Income Tax (13%)
– Excise and Customs Duties
7
Consolidated Budget Expenditures
Expenditures (2015 estimate)
Expenditures (2015 estimate)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
General
government
expenditures
35.1%
Other
expenditures
Social
10.2%
policy 8.7%
education
16.9%
National
economy
15%
health
14.0%
FYI: Average wages and pensions (US$)
other
wages and pensions
goods and services
sovereign debt servicing
transfers and subsidies
capital expenditures
2015
2016
700
576.2
600
500
417.2
345.4
300
200
Expenditures in 2016:
448.7
419
400
598.2
174.8
169.1
152.4
2010
2011
2012
wages
224.6
235.4
166.7
272.3 trillion BYR
(US$12.0 billion)
100
0
2013
2014
pensions
2015
8
Rule 2: Maintaining budget social
expenditures in the GDP
Consolidated Budget Expenditures for Social Sector (% GDP)
6.0
5.1
5.0
4.0
4.0
5.0
4.9
5.1
5.1
4.2
4.8
4.8
4.0
4.0
3.8
3.9
4.0
0.3
0.3
0.2
0.3
0.3
0.3
0.3
2010
2011
2012
2013
2014
2015
2016
3.0
2.0
1.0
0.0
education
health
R&D
9
National Debt– consistently safe levels
We assess also positively a recently approved debt policy establishing
internal thresholds for national debt to GDP ratio at the level of 45% and
the annual spending ratio for servicing and repayment of hard currency
debt to the international reserves also at the level of 45%.
As of 01.01.2016:
Standard & Poor’s, Research Update, April 10,2015
External national debt is
US$12.4 billion, or 22.7% of GDP
 Key features of our external national debt:
— Share of loans from international financial institutions – 20.8%
— Share of earmarked, targetted loans – 41.0%

Raising of foreign National loans seeks implementation of critical investment projects
(earmarked, targetted loans) and national debt refinancing.
External and internal national debt, US$ billion
3.8
4.1
5.2*
2.1
3.0
11.8
12.0
12.4
12.6
12.4
2011
2012
2013
2014
2015
* As of 01.01.2016
external debt
internal debt
*
Rule 3: Retention of safe levels of the national
debt
National Debt, % of GDP
Maastricht Criterion– 60%
Legislative Threshold – 45%
*
32.5%
24.9%
23.7%
22.4%
22.3%
2011
2012
2013
2014
* As of 01.01.2016
2015
National Debt Economic Safety Indicators
Indicators
Threshold
Value
External National Debt, US$ billion
External National Debt, % of GDP
25
Internal National Debt, Trillion BYR
01.01.2015
01.01.2016
12,6
12,4
16,6
22,7
48,4
97,4
Internal National Debt, % of GDP
20
5,7
9,8
Payments for National Debt Servicing (both
foreign and domestic), % of republican
budget revenues
10
5,5
7,9
Payments for Foreign National Debt
Repayment and Servicing Fees, % of hard
currency receipts
10
7,1
7,9
Rule 4: Generation of Republican Budget Surplus for
National Debt Repayment
Surplus generation in 2015-2016, BYR trillion
25
20
Budget expenditures
2.8
Budget expenditures
6.4
15
10
20
Surplus generation
18.3
Surplus generation
17.2
11.9
5
0
export
customs
areas for
application
2015 (estimate)
export
customs
areas for
application
2016 (approved)
Republic of Belarus Budget Structure
General Government Consolidated Budget
Government ExtraBudgetary Funds
Social Welfare Fund
Consolidated Budget
Local Budgets
Republican Budget
Government Extra-Budgetary
Fund of Civil Aviation
Government Extra-Budgetary Fund of
the Penitentiary Department
Government Extra-Budgetary Fund for
Universal Servicing of the Ministry of
Telecommunications
(1,327 total)
Primary Level
Budgets
Basic Level
Budgets
Rural
District
(1,162)
(10)
Oblast
(Regional) Level
Budgets
Oblast Budgets
(6)
City
Rural Towns
(16)
(cities subordinate to
oblasts/regions)
(118)
Minsk City
Budget
City
(cities subordinate to
districts)
(14)
14
Budget Rules at the Local Level
Rules for
Allocation of
Resources
Debt Rule
Deficit Rule
Budget Rules at the Local Level (cont’d)
Deficit Rule
Debt Rules
Rules for Resource
Allocations
Budget Code
Budget Code
Budget Code
Law on Republican Budget
Law on Republican Budget
Decisions of Local Council Members
Decisions of Local Council Members
Decisions of Local Council Members
i.
ii.
Annual limits for budget
i.
Debt level restriction
deficits
ii.
Limits on expenditures for
Permission to use
debt servicing and
accumulated balance from
repayment
previous years
iii.
Borrowing exclusively in the
internal market
iv.
Conditions for issuing
guarantees
i.
Allocation of spending
authorities
ii.
Distribution of tax and nontax revenues by budget levels
iii.
Inter-budgetary relations