OREANDA-NEWS. November 21, 2011. Moody's Investors Service has confirmed at B3 the foreign- and local-currency government bond ratings of Belarus. The country's B3 foreign-currency bond ceiling and the Caa1 foreign-currency bank deposit ceiling were also confirmed. The outlook on the ratings is negative. In addition, Moody's has confirmed the local-currency bond ceiling at Ba3 and downgraded the local-currency bank deposit ceiling to B1 from Ba3.

Rating actions conclude a review for possible downgrade initiated in July 2011. The confirmation of the government bond ratings was prompted by the potential narrowing of the country's account deficit due to currency depreciation, the possibility of Belarus obtaining near-term financing for the deficit, and incremental efforts (such as exchange rate liberalisation) to rebalance the macro-economic framework.

The negative outlook on the rating reflects the following concerns: (i) a likely significant slowdown in economic growth in 2012 will worsen profitability and asset quality in the banking system, increasing the government's contingent liabilities; (ii) the relatively low levels of foreign currency reserves leave Belarus's balance of payments vulnerable to event risk; and (iii) political risks.

The previous rating action on Belarus was implemented on 21 July 2011 when Moody's downgraded the government's bond rating to B3 from B2, the foreign currency bond and bank deposit ceilings to B3 and Caa1(from B1 and B3 respectively), and the local currency bond and bank deposit ceilings were downgraded to Ba3 from Ba1. In addition, the ratings were placed under review for downgrade.

In the spring of 2011 Belarus was struck by a financial crisis, which forced the country’s central bank to devaluate the local currency by 36% against the dollar. To stay afloat, Belarus would opt to draw stand-by loans from the EurEsEC Bailout Fund to the tune of USD 3 billion and is considering the prospects of drawing more loans from the IMF and other sources. Since early 2011 the Belarusian ruble has devaluated by 189%, NBB chief NAdezhda Yermakova reported October 20.

Following the downgrade of Belarus’ sovereign rating Moody’s Investors Service downgraded national currency deposit ratings of six Belarusian banks. National currency deposit ratings of Belarusbank, Belagroprombank, Belinvestbank, Minsk Transit Bank and Bank Moscow-Minsk have dropped from B2 to B3, Belpromstroibank’s – from B3 to B1.

Their ratings were placed under review for further downgrade, Moody’s press release said.