Belarusian Railways (BZhD) has failed to redeem a matured euro bond and make interest payments for two other euro bonds. Until 2020, euro debt was a good option to attract substantial sums of money for Belarus, but times have changed. The consequences of the default remain unclear.
“In order to get resources for the improvement of its infrastructure, BZhD decided to issue eurobonds, since at that moment in 2018-2019, that scheme seemed most available for the acquisition of large sums of foreign exchange”, explains the Community of Railway Workers of Belarus.
In those years, the Belarusian economy was not yet subject to major international sanctions, meaning that taking on euro debt was still a good option to attract funding. Times have changed since then: Belarus’ international financing options have become very limited.
State support guaranteed
“Ultimately, the combination of economic crisis, sanctions, a decline of the financial situation and inability to attract new resources led to the fact that Belarusian Railways could not fulfill its eurobond obligations. This case is part of broader financial and economic instability of the railways”, the railway workers’ association says.
The impact of Belarusian Railways’ default remains unclear. However, it seems highly unlikely to have a major impact on the country’s railways. The company is a state-owned monopolist and plays a key role in Belarusian logistics, both civilian and military. Even if the company would get into serious financial trouble, it is guaranteed to get significant state support to stay afloat.
