BelaPAN: ACF Council Postpones its Discussion on Disbursement of Sixth Tranche of Credit to Belarus by Six Months

Minsk, 30 December/ Dmitry Zayats - BelaPAN. The Council of the EurAsEC Anti-Crisis Fund (ACF) has postponed its discussion on disbursement of the sixth tranche of the financial credit to Belarus because of the country's failure to meet ten of the targets under the current stabilisation programme. That decision––which text has been received by BelaPAN––was adopted on December 27, based on the results of the thirteenth meeting (in absentia) of the Fund’s Council.

It is recommended to Belarus to develop and implement measures to fulfil all the targets of the sixth tranche. These measures and the timeline for their implementation should be agreed with Eurasian Development Bank (EDB)––which is the ACF Resources Manager––in the framework of a new Letter of Intent. The ACF Council has extended the stabilisation programme until July 1, and the financial credit availability – until December 31, 2014. The ACF Council will come back to discussing the disbursement of the sixth tranche to Belarus in the third quarter of 2014.

“There is a good reason for the decision of the ACF Council to postpone the sixth tranche of the ACF financial credit, as a list of 14 targets to be met for the disbursement of the sixth tranche was agreed and fixed in a decision of the Council in June this year. As of October 1––the check date for the sixth tranche––10 of the 14 targets, including five controlled ones,  had not been met,” says Deputy Chairman of the EDB Management Board Sergey Shatalov to BelaPAN.

He explains that the failure to meet the targets is a result of both external factors, “which are beyond the control of the Government and the National Bank of Belarus”, and internal ones, which are created through the steps taken by the Belarusian authorities.

 “The external factors include the slowdown of economic growth in Russia, the effects of Russia’s accession to the WTO that reduced the tariff protection of the Customs Union markets and weakened the competitiveness of Belarusian exporters, as well as the developments in the potash market,” notes Mr. Shatalov.

However, “continued policies of credit expansion , the rate of which did not decelerate compared to 2012, as well as wage increases at a rate significantly in excess of the rate of growth of labour productivity equally contributed to the depletion of international reserves and deterioration of the balance of payments of Belarus,” he says.

Therefore it is “logical”, states Mr. Shatalov, that the ACF Council adopted the decision to extend the credit programme “to give the Belarusian authorities a chance to achieve the aforementioned controlled targets by mid-2014.”

The Management of Eurasian Development Bank hopes that implementation of the Joint Action Plan of the Government and the National Bank of Belarus will help meet the targets of the credit programme in future.

“The Joint Action Plan of the Government and the National Bank of the Republic of Belarus adopted on October 10 is a step forward in the right direction. We see the first positive results of its implementation: the speculative pressure on the exchange rate of the domestic currency has subsided, and the depletion of the international reserves has slowed down. If these positive results are supported with further, more decisive steps of the Belarusian authorities over the first six months of 2014, all the targets of the sixth tranche can be achieved,” says Mr. Shatalov to BelaPAN.

He also notes that the Eurasian Development Bank will continue “its active work with the authorities of Belarus to successfully complete the stabilisation programme supported with the financial credit of the Anti-Crisis Fund.”

To remind, the current programme of Belarus with the EurAsEC Anti-Crisis Fund was launched two and a half years ago. On June 4, 2011 the ACF Council approved a US $3 billion financial credit for Belarus, with its proceeds to be used to stabilise the balance of payments and improve the competitiveness of the Belarusian economy.

The credit was scheduled to be disbursed in six tranches over 2011-2013 based on implementation of stages of the credit programme by the Belarusian Government. The Ministry of Finance of Belarus expected the sixth tranche to be disbursed in November 2013. The fifth tranche of the credit of the EurAsEC Anti-Crisis Fund was disbursed to Belarus on April 30 this year.

In the Fund’s assessment of performance under the terms of the fifth tranche, it was noted that the borrower had not met several of the indicative targets. In particular, Belarus failed to meet the indicative targets related to privatisation proceeds and the level of cost recovery through utility and public transport tariffs for households. In addition, the targeted level of growth of banks’ claims on other sectors of the economy (an indicative target) was twice the planned amount in 2012.

In 2013, based on discussion with the Belarusian authorities, the target of growth of credit to the economy was reclassified as a controlled one and set at the level of 1.5% per month. In the opinion of the Fund’s representatives, restraining the rate of credit growth fosters stabilisation of the balance of payments and containment of inflation. However, as reported by the EurAsEC Anti-Crisis Fund earlier, the rate of growth of credit to the economy in Belarus exceeded the planned level by a significant margin this year.