The Belarusian economy is currently in a recession, facing capital outflows and devaluation of its currency. The banking sector is highly exposed to state enterprises, and may be strained further as borrowers’ solvency deteriorates. Over the long term, developing local currency instruments in the domestic capital markets could make the financial system more resilient, and reduce reliance on a fragile banking system. There is significant potential in the domestic bond market as many enterprises have already issued in the market. However, local currency instruments are under-developed, reflecting the wider substitution of foreign currency in the financial system, and pricing and allocation of such bonds has been largely on non-market terms.