The enlarged Board meeting of the National Bank last week recognised high fiscal risks as the main threat to the financial stability in Belarus. In H1 2016, income tax revenues in the state budget totalled 30% of the projected volume and revenues from foreign operations only 42% of the annual target. The authorities are likely to step up pressure on financially successful enterprises and force them to increase contributions to the state budget. In addition, they may introduce new additional payments for SMEs at the local level, reduce subsidies to local budgets, and stream financial assistance only to key areas. If by the year-end the state budget has a sharp deficit in tax revenues, the authorities may issue securities in order to balance out the budget, which, however, is likely to increase the public debt servicing costs in the coming years.
