Almaty, 25 October 2011 — Experts of the Eurasian Development Bank (EDB), the Resource manager of the EurAsEC Anti-Crisis Fund (ACF) have noted with satisfaction the progress in the implementation of a number of reforms included in the Stabilization Program of the Government and the National Bank of Belarus. EDB experts have also emphasized that the route to the stabilization of the economy and the exchange rate lies through more decisive measures for constraining concessional lending under government programs and raising interest rates above the projected inflation level.
EDB’s delegation visited Minsk from 17-24 of October 2011 to evaluate the implementation of ACF’s financial credit. During the visit, meetings were carried out with experts of the National Bank, Ministry of Finance, Ministry of Economy, other agencies of the Republic of Belarus, and representatives of international financial organizations. Key findings of the evaluation visit were presented to the Deputy Prime Minister Sergei Rumas, Chairperson of the Board of the National Bank of Belarus Nadezhda Ermakova, Minister of Finance Andrei Harkovets, and Minister of Economy Nikolai Snopkov.
According to EDB experts, progress has been achieved in such issues as transitioning to the unified ruble rate determined by the market (on the 20th October 2011), strengthening the National Bank’s independence, and establishing the Development Bank of Belarus. EDB’s team also welcomed plans to balance the state budget of the current year.
At the same time, experts of EDB noted the continuation of soft monetary policy by maintaining interest rates at levels significantly lower than inflation, which stimulates excessive lending to the economy and expands domestic demand, as well as maintains the currently large account deficit, spurs inflation and raises risks in the banking system. The level of direct concessional lending under government programs is still high. It fuels inflation, leads to the growth of budget expenditures for interest rate subsidy on concessional loans, and reduces incentives to invest on market principles. The path to stabilizing the exchange rate, curbing inflationary pressures and increasing investment inflows lies through raising interest rates above the level of projected inflation and reducing excessive concessional lending.
“Progress is evident in the implementation of some measures of the ACF loan’s second tranche. We also welcome the Government’s plans for 2012 that envisage a balanced state budget and the reduction of lending to the economy to a level that is consistent with correcting its imbalances, — said Sergei Shatalov, ACF Managing Director. — In the interests of the country’s long-term development it is extremely important to continue reforms that will ensure macroeconomic stabilization and the reduction of the still large balance of payments deficit. The EurAsEC Anti-Crisis Fund will continue its close cooperation with the ministries and agencies of the Republic in order to achieve this important goal.”
