EurAsEC Anti-Crisis Fund continues pushing for reforms

Single exchange rate of the Belarusian ruble, tightening of the monetary policy, as well as the resignation of Russian Finance Minister Kudrin – do not guarantee loans from the ACF. It implies that the Belarusian government has to continue fulfilling the conditions set by the creditor.

Experts of the Eurasian Development Bank (EDB), the fund manager of the EurAsEC Anti-Crisis Fund (ACF), worked in Belarus from 17 to 24 September, assessing the performance of Belarus against its obligations under the loan programme. Experts praised the progress in implementation of a series of reforms, part of the stabilization programme of the Government and the National Bank, but emphasized that “Belarus also needs to tighten its monetary policy. New loans issued on easy terms to support government programs drive up inflation and the government’s expenditures on subsidizing the interest rates. Maintaining interest rates at levels lower than the rate of inflation paves the way for excessive lending to the economy and increased domestic demand”.

Comment

“Belarus also needs to tighten its monetary policy. New loans issued on easy terms to support government programs drive up inflation and the government’s expenditures on subsidizing the interest rates. Maintaining interest rates at levels lower than the rate of inflation paves the way for excessive lending to the economy and increased domestic demand”

Regardless of the introduction of the single exchange rate of the Belarusian ruble, tightening of the monetary policy, as well as the resignation of Russian Finance Minister Aleksei Kudrin (who voiced consistent criticism towards the Belarusian authorities), the government will have to continue fulfilling its commitments – to raise interest rates to the level of inflation (87% during January – October 2011 period), to reduce concessional lending, to raise tariffs for the population, etc. The authorities cannot fail implementing these painful reforms, given the country’s treasury poor condition; the government cannot afford to neglect the following transfer of USD 445 million, in particular, given that $ 1 billion loan from Russia is still under consideration. The reforms in question imply deterioration of social problems.