EDB: Discussion of new EurAsEC Anti-Crisis Fund program for Belarus is premature
Moscow, 29 August, 2013. — The Eurasian Development Bank (EDB) in its capacity of Resources Manager of the EurAsEC Anti-Crisis Fund (ACF) believes that it is still premature to discuss a new ACF program for the Republic of Belarus. This was stated today by Sergey Shatalov, Deputy Chairman of the EDB’s Managing Board.
“First we need to assess the outcomes of the current stabilization program, launched in 2011 and still ongoing, — he indicated. — Under this program the last (sixth) tranche will be disbursed to Belarus by the end of this year — provided the performance benchmarks, specified therein, are achieved. In addition to the above assessment of performance under the sixth tranche, we also have to undertake, in close cooperation with the Government and National Bank of Belarus, a comprehensive evaluation of the results of this stabilization program as a whole”.
According to Sergey Shatalov measures undertaken by the Government and National Bank of Belarus, supported by the current ACF program, have delivered tangible positive outcomes. The exchange rate has been unified; emission lending by the National Bank has been terminated; the volume of subsidized lending under government programs has been significantly reduced. These policies, alongside with improved terms of energy trade and favorable external economic environment, were key to resolving the balance of payments crisis of 2011 and halting inflation. The ACF credit has helped Belarus to lay the foundation for further economic stabilization. However, stabilization is not complete and should be continued. This stabilization is vitally important for addressing the key challenges faced by the country in the areas of structural reform, modernization and improving the competitiveness of Belorussian industries on global markets.
Today, the economic situation is stable, the National Bank keeps the financial markets and banking system under effective control, and so far the budget is being executed with a surplus. However, the fact that various types of lending under government programs are still significant is a reason for concern. It should be mentioned, though, that the volume of subsidized lending under government programs are currently smaller than in the first half of 2011, prior to the launch of the ACF stabilization program. “We welcome such developments, because excessive subsidized lending spurs inflation and undermines the balance of payments, — emphasized Sergey Shatalov. — There is a need to further reduce directed lending. The big issue today is what is an optimal level of lending to the economy, not only under government programs, but also from market-driven sources”.
The Letter of Intent, which outlines stabilization parameters for 2013 agreed upon by the Government and National Bank of Belarus, establishes growth of lending to the economy as one of its control targets. This target is fixed at 1.5% per month, which should be sufficient to both support economic growth and to allow further reduction of inflation and strengthening of the balance of payments. The two latter objectives are very important, and should be constantly kept in mind. This level was agreed upon by EDB, the Government and National Bank of Belarus on the basis of official macroeconomic forecasts. During the first seven months of 2013 the monthly growth rate of this indicator exceeded the agreed benchmark and averaged 1.98%. Another reason for concern is the fact that the growth of real wages outpaces productivity growth significantly. This increases the inflationary overhang and puts pressure on international reserves.
“It is too early to make conclusions. We need to wait for further developments in Q3 and Q4, — summarized Sergey Shatalov. — EDB is in close dialog with the Government and National Bank of Belarus to ensure prompt assessment of the current situation”.
Additional Information
Eurasian Development Bank is an international financial institution founded by Russia and Kazakhstan in January 2006 with the mission to facilitate the development of market economies, sustainable economic growth, and the expansion of mutual trade and other economic ties in its member states. EDB’s charter capital exceeds US $1.5 billion. The member states of the Bank are the Republic of Armenia, the Republic of Belarus, the Republic of Kazakhstan, the Kyrgyz Republic, the Russian Federation, and the Republic of Tajikistan. Read more about EDB at https://www.eabr.org
The EurAsEC Anti-Crisis Fund (ACF) amounting to US $8.513 billion was formed on 9 June 2009 by the governments of the same six countries. ACF’s objectives are to assist the member countries in overcoming the consequences of global financial crisis, to ensure their economic and financial stability, and to foster integration in the region. The ACF member countries signed the Management Agreement with Eurasian Development Bank, giving it the role of the ACF Resources Manager.