BELARUSIAN ECONOMY & TRADE

The placement volumes of government loans, and the expenses on their redemption and servicing are defined in the Law on the budget of the Republic of Belarus for the coming year, outgoing from the predictive inflation rate, GDP growth, and other macroeconomic indicators.

Plot 1. Expenses of the National Budget, Including on Servicing Government Loans

Table 4. Expenses on Servicing Government Securities

Percent of GDP

Indicators

2001

2002

2003

2004

2005

(plan)

1. Servicing of Government Securities

0.48

0.44

0.37

0.34

0.26

2. Expenses on servicing Government Securities with account of the principal debt repayment

4.10

2.64

2.70

2.05

1.62

The participants of government securities market of the Republic of Belarus are as follows:

1. The Ministry of Finance of the Republic of Belarus – an issuer, acting on behalf of the Government of the Republic of Belarus. The Ministry of Finance develops the offers, defines the terms of the issue, placement, circulation, redemption and servicing of the government liabilities, which are forming both the internal, and foreign government debt.

2. The National Bank of the Republic of Belarus – a financial agent of the Government in charge of placement, servicing and redemption of the issues of government securities; it carries purchase-and-sale transactions with them in the secondary securities market, performs the functions of the Central Depositary, and controls the accounting of the government bonds in circulation.

3. Investors – professional participants of the securities market, legal entities and individuals, including foreign ones.

The range of instruments of the stock market, which may be used by the Government of the Republic of Belarus for attraction and redistributions of free money resources, is rather broad. Today, according to the legislation of the Republic of Belarus, the Ministry of Finance issues, on behalf of the Government, the following kinds of government securities:

For legal entities:

· Government short-term bonds;

· Government long-term bonds;

· Government bonds nominated in free convertible currencies;

· Government bills of exchange of the Republic of Belarus.

For individuals:

· Bonds of the government lottery (premium) currency loan of the Republic of Belarus;

· Bonds of the government savings loan of the Republic of Belarus.

Of the highest demand among investors-legal entities are the government short-term and long-term bonds nominated in the national currency – Belarusian roubles.

The owners of state short-term bonds (with maturity of up to one year) (SSTB) and state long-term bonds (with maturity of one year and more) (SLTB) may be legal entities, both residents and non-residents of the Republic of Belarus. The bonds are issued in individual issues on the basis of the decision of the Ministry of Finance. These securities are issued as records in accounts with a discount or interest income. On the bonds with a discount income, the face value is paid out at redemption. The interest income may be paid out monthly, quarterly, and also at redemption of securities. The terms of paying out the income are defined in the decision of the Ministry of Finance on each particular issue.

It is possible to buy SSTB and SLTB as follows:

1) At auctions held at the "Belarusian Stock Exchange" Joint Stock Company, according to the statement of the Ministry of Finance, through the participants of the auctions – members of the stock market section;

2) Under a contract with the Ministry of Finance.

The auctions on state bonds allocation are held every Tuesdays. Additional allocations of the bonds not sold at previous auctions are held daily at the prices established by the Ministry of Finance.

Chart 2. Structure of government securities in circulation as of 01/01/2005

Plot 2. Average Circulation Time of Allocated State Bonds, 2004

The state bonds nominated in freely convertible currencies are nominal government securities and are issued as records in accounts. Bonds may have a coupon income (paid out monthly or quarterly), or an interest income (paid out at redemption). The issue of bonds is undertaken under decision of the Ministry of Finance, and placement thereof – through sale by the Ministry of Finance to legal entities (residents and non-residents of the Republic of Belarus) on contractual terms. The maturity of the bonds, the terms of paying the accrued income on them are specified in the Order of the Ministry of Finance on the issue, and are defined in each particular contract.

Under a mutual consent of the issuer and the investor, it is possible to make an early redemption or an exchange of the bonds (SSTB, SLTB, state bonds nominated in freely convertible currencies) for new issues.

In the Republic of Belarus, the government securities market operates since February 1994. During these 10 years, the Government has been timely coping with its obligation to redeem its debt securities.

Recently, the country has witnessed a certain progress and positive tendencies in developing the market of governmental liabilities. This segment of the financial market has been dynamically developing due to expansion of the nomenclature of issued securities and introduction of new ways of their allocation.

The increased attractiveness of the government securities market in many respects has been caused by the following:

- a variety of maturities (3, 6, 9 months, 1 year and more) of the bonds offered by the Ministry of Finance and the conditions of paying out incomes on them;

- introduction of a new kind of auction – the exchange auction;

- preservation of a positive actual profitability of state bonds;

- participation of non-residents;

- activation of the secondary market;

- an improvement of the economic position of the Republic of Belarus as a whole.

Since 2000, the government securities are placed among non-residents of the Republic of Belarus. The fact of their timely and complete redemption evidences the general solvency of the country. The recent years have witnessed a considerable increase of participation of non-residents in purchase of state bonds. The current legislation of the Republic of Belarus on state and government securities allows non-residents to invest their money resources into all kinds of securities issued by the Government of the Republic of Belarus.

Plot 3. Government Securities Allocation and Redemption

Chart 3. Owners of Government Securities

The stock market of government securities is one of the major elements of the national financial market, enabling the Government and the National Bank of the Republic of Belarus to solve the tasks of monetary and credit regulation at the macroeconomic level are solved by.

The "Belarusian Stock Exchange" JSC has been entrusted the exclusive right of running the secondary circulation of government securities. According to Decree of the Council of Ministers of the Republic of Belarus and the National Bank of the Republic of Belarus No. 1681/63 dated 02.11.1998, the secondary circulation of state short-term and long-term bonds is allowed only through the trading system of the "Belarusian Stock Exchange" JSC, through the participants of government securities trading, who are the members of the stock market section of the "Belarusian Stock Exchange" JSC, who have concluded the corresponding contracts with it, and the National Bank of the Republic of Belarus.

The secondary market of governmental bonds is based on the "till repayment (redemption)" transactions – the purchase-and-sale transactions of sale and of the bonds, concluded with trading participants; REPO transactions – the purchase-and-sale transactions on the bonds, concluded with the trading participants – banks, with the obligation:

- for the seller – of their subsequent buy out,

- for the buyer – of their subsequent sale.

It is necessary to note that transactions with government securities prevail in the structure of transactions at the "Belarusian Stock Exchange" JSC (77% of all transactions and 90% of the total volume).

Plot 4. Volumes of Operations with Government Securities in the Secondary Market, 2002-2004

Information on placement of government securities allocation with indication of issue parameters and sales results is disseminated by the Ministry of Finance through the Belarusian Stock Exchange electronic reference system (www.bcse.by), banks (www.belarusbank.minsk.by, www.priorbank.by), the National Bank (www.nbrb.by), in its own Web site (http://ncpi.gov.by/minfin/), and through periodicals.

On Taxation of Operations with Government Securities of the Republic of Belarus

In the Republic of Belarus, taxation of operations executed by foreign legal entities with government securities depends on the fact, whether they carry out their activities in the territory of the Republic of Belarus through their permanent representative offices, or obtain their incomes from the sources in the Republic of Belarus without opening a permanent representative office in its territory.

The foreign organizations, which are carrying out their activities through their permanent representative offices:

1) Being professional participants of the securities market and having licenses on these of activities, shall pay collections to the target budgetary funds (a collection to formation of local target budgetary housing-and-investment funds and a collection to financing the expenses related to maintenance and repair of the housing facilities; a collection to the national fund for support of manufacturers of agricultural products, foodstuffs and agrarian science, and a tax on highway users to road funds) according to Articles 11 and 24 of the Law of the Republic of Belarus "On the 2004 Budget of the Republic of Belarus" at a rate of 1, 15 and 3 percent, accordingly.

2) Shall pay a tax on incomes from operations with securities at a rate of 40 percent (for banks – at a rate of 30 percent), with account of the following privilege:

Privilege

According to the Edict of the President of the Republic of Belarus dated 23.12.1999 No. 43 "On Taxation of the Incomes Obtained from Particular Activities," the payers of the tax on incomes may reduce the taxable base by the sums of incomes obtained from operations with government securities and defined as a difference between the price:

- of redemption and the purchase price of securities, reduced by the sum of expenses on these operations – at redemption of securities by the issuer;

- of sale of securities, but not higher than their current price as of the date of sale, and the purchase price of these securities, reduced by the sum of expenses on the these operations - at purchase-and-sale of securities by organizations.

The foreign legal entities, who do not execute their activities in the Republic of Belarus through their permanent representative offices.

According to the Edict of the President of the Republic of Belarus dated 23.12.1999 No. 43 "On Taxation of the Incomes Obtained from Particular Activities," the incomes received by the above organizations from operations with government securities are subject to preferential taxation as follows:

- the payers of the tax on incomes may reduce the taxable base by the sums of incomes obtained from operations with government securities, and defined as a difference between the price:

- of redemption and the purchase price of securities, reduced by the sum of expenses on these operations – redemption of securities by the issuer in the form established by the legislation of the Republic of Belarus;

- sale of securities, but not higher than their current price s of the date of sale, and the purchase price of such securities, reduced by the sum of expenses on these operations - at purchase-and-sale of securities by organizations (except for broker and other mediatory operations).

The tax on incomes from operations with securities for legal entities is charged at a rate of 40 percent, for banks – at a rate of 30 percent.

Should an international treaty of the Republic of Belarus establish other rules of taxation of the above incomes, the rules of the international treaty of the Republic of Belarus shall apply.

Should under such treaties the above incomes be subject to liberation from taxation in the Republic of Belarus, and to taxation in the resident country of the foreign organization, then to get a complete or partial liberation from taxation on the incomes, the foreign legal entity shall present, by its own or through the person, who is charging (paying) the income, to the tax bodies of the Republic of Belarus an official confirmation of the fact of a permanent residence of the foreign legal entity in the country, with which the Republic of Belarus has a valid international treaty on taxation issues.

On Depositary Accounting Procedure for Non-Residents

of the Republic of Belarus

A depositor opens a DEPOT account on the basis of the depositary agreement concluded with the Depositary. To open a DEPOT account at the Depositary of the Republic of Belarus, a non-resident should present the following documents to the Depositary:

1. A written application on opening a DEPOT accou

BELARUSIAN ECONOMY & TRADE

Historical outlook

Foreign Trade Sectors of Economy

MAJOR BELARUSIAN CONCERNS
(CORPORATE GROUPS OF ENTERPRISES)

BELARUSIAN COMPANIES, ENTERPRISES
AND PRODUCTION ASSOCIATIONS

FREE ECONOMIC ZONES

Website navigation

Republic of Belarus

Embassy Home

News & Events

Press Releases

Commercial Section

Cultural & Humanitarian Section

Consular & Visa Section

Contacts & Location

Site Map

Downloads