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Eastern Europe
October 19, 2018 www.intellinews.com I Page 16
Russia-led bail-out fund allocates $200mn support tranche to Belarus, warns about growing risks
bne IntelliNews
The Russia-led Eurasian Fund for Stabilisation and Development (EFSD) has allocated a new $200mn support tranche to cash-strapped Belarus from the lender's $2bn loan agreed
with Minsk in 2016, warning the post-Soviet republic about growing risks "in terms of debt sustainability and a higher load on the budget and balance of payments in the medium term".
The EFSD's move seems to be purely political as Belarus has failed to implement five out of 25 indicators (including three control indicators) by the initial deadline (October 1, 2017).
"The control measures that failed were aimed to support small and medium-sized enterprises by issuing a governmental resolution to implement regulatory impact assessment (RIA) of the draft legislation that influences the doing of business; create the institution of a business ombudsman; and stimulate the labour market by speeding up staff optimisation at state-owned enterprises and retraining those dismissed in line with market requirements," the lender said in a statement. The key purpose of the indicative measures
that have not been fulfilled was to restrain the inflationary pressure exerted by excess money supply, the EFSD added.
At the same time, the EFSD’s council decided to grant release with respect to all the indicators that have not been met "since Belarus had managed to fulfil additional conditions for the provision of the sixth tranche”.
Specifically, the joint guidelines of the finance ministry and the economy ministry in Minsk on substantiating the draft legislation in financial and economic terms were supplemented with the requirement to implement RIA as one of the key mechanisms to reduce pressure on business development.
In March 2018, the National Bank of Belarus (NBB) amended its prudential regulations to constrain excessive consumer lending as one of the potential adverse factors that influences the dynamics of non-performing debts and worsens the balance of trade.
In a separate statement published on October 16, the EFSD said that the cost of new borrowings that exceeds the forecast medium-term economic growth rates creates risks in terms of debt sustainability and a higher load on the budget and balance of payments in the medium term.
"The significant debt load of state-owned enter- prises is an additional risk factor," the statement reads. "The slow progress in the implementation of structural reforms on the whole and the com- mercialisation of state-owned enterprises in par- ticular reduces the potential for economic growth in Belarus and may lead to a further deterioration in the financial standing of state-owned enterpris- es and increased pressure on public debt sustain- ability in the medium and long term."
The fund added that both short- and medium-