BELARUS NEWS AND ANALYSIS

DATE:

30/10/2007

Moody's report on Belarus

Oct 30 - In its annual report on Belarus, Moody's Investors Service says the country's B1 government bond ratings are supported by recent excellent macroeconomic performance and low debt, and are constrained by the inflexibility of Belarus' tightly regulated and industrially concentrated economy.

The government bond ratings, along with Moody's assessment of a moderate risk of a payments moratorium in the event of a government default, serves as the basis for Belarus' Ba2 foreign currency country ceiling for bonds.

"The ratings reflect both Belarus' good record of economic growth over many years and the changed circumstances and challenges now facing the government," said Moody's Vice President Jonathan Schiffer, author of the report. "This may lead to certain economy-wide difficulties in efficient adjustment to external shocks." The Republic of Belarus recently concluded an agreement with OAO Gazprom (GAZP.MM: Quote, Profile, Research) of the Russian Federation whereby Gazprom will purchase 50% of Beltransgaz transit pipeline over several years, and Russian gas import prices will rise significantly, said Schiffer. According to the analyst, the new, substantial rise in energy prices will have a significant micro and macroeconomic affect on the Belarusian economy. According to the analyst, a common energy policy, with common energy tariffs for Belarusian and Russian enterprises, excluding transport costs, is unlikely.

"In fact, the Russian Federation, Belarus and Kazakhstan are moving step-by-step towards a customs and trade union - expected to be finalized within three years. This represents a downscaling of initial expectations from 2002, when discussions were aimed at full political and economic union," said Schiffer.

The rating agency's report, "Belarus: 2007 Credit Analysis," is a yearly update to the markets and is not a rating action.

Source:

http://uk.reuters.com/article/oilRpt/idUKWLA205420071030