EDB head: Belarus won’t do without the structural reform of economy – oil is of no use anymore

The question about $3 billion for Belarus is left open, and the situation for oil-dependent economies of Russia and Belarus is “extremely tough”, assumes Dmitry Pankin.

During the late briefing on August 13, the President of the Eurasian Development Bank Dmitry Pankin informed that he went to Minsk in order “to discuss the Bank’s strategy and some perspective topics on Belarus”. We know that for those who came to the meeting the most “perspective topic on Belarus” was a $3 billion loan that Belarus’ government is asking and that it cannot get because of insufficient diligence to fulfill the terms of the former loan.

About the loan

- It is an issue of the Bank as of the manager of funds of the Eurasian Stabilisation and Development Fund. The Bank has two forms: we have our own balance that we work on and finance; through this balance all loans to Belarusan enterprises are going through. Secondly, it is a Bank as a manager of funds of the Eurasian Stabilisation and Development Fund, through which all financial loans are provided. Financial loan to the Republic of Belarus has already been allocated, and allocation of a new one has been discussed at the latest session of the Fund, where the Board of the Fund decided that there is a need to find out why the terms that were set when the first loan of $3 billion was allocated weren’t fulfilled, due to which, as is known, the sixth tranche wasn’t realized. Now we should investigate these terms: macroeconomics and monetary and credit policy in the first place; what is still actual, what can be changed, how the positions of the parties can be brought together. Now we are expecting the Commission of the Eurasian Development Bank to come for negotiations with the Belarus’ government on August 24-28, where we plan to talk about each indicator thoroughly. I hope we will be able to find compromises.

BelAZ is on the verge

- BelAZ is our debtor – we have a loan of $75 million with it. It has been having problems with realization of produce for a long time now, and the former schedule of payments turned out to be impossible for the enterprise. That’s why we started negotiations with BelAZ, agreed on a new schedule of loan payments, decided on the additional guarantees, such as the state guarantee of the Republic of Belarus on this loan, and, accordingly, have signed the agreement on restructuralization of the debt. BelAZ fulfills its obligations within the frames of this restructured loan.

The choice of the further strategy

- We will be organizing large decapitalization of the Bank so that it would be able to have large-scale projects that are having systemic influence on the economy of our countries, i.e. this is the key crotch. If we will be able to invest $10 billion in the Bank’s authorized capital stock, then it will be able to deal in large transport and power projects; if not – we should consider variants a to what we can do with the active capital. Naturally, we are not considering Belarus to be a country that will be able to invest a capital of $10 billion – it is a question to the Russian Federation, Kazakhstan that also have big problems now with their budget. In particular, one of the choices mentioned above: whether the Bank should concentrate only on integration projects or work broader on development projects? If we only work on integration projects then it’s clear why we need such bank; it is a particular bank – an international fund organization that is dealing particularly with such integration projects. A number of stockholders support such variant. The other position is that there are still very few such projects – it is hard to find a purely integration project – so the bank has to work broader and take upon itself not only integration, but also classic development projects that all development banks have. The position of the Belarusan government was rather suggesting that we need a broader spectrum of projects and don’t limit ourselves with purely integration projects.

Crisis

- Now the situation is very hard for all our countries, for Russian Federation and for Belarus, too. First of all, it is related to the fact that our countries are oil-dependent and extremely dependent on prices on oil and, accordingly, on export profit from the sells of hydrocarbons. This dependence is felt twice as intense in Belarus, since oil refining and profits that it brings is a serious issue for Belarusan macroeconomics. The situation in the Russian Federation caused by the decrease of prices on oil; correspondingly, the decrease of demand and decrease of GDP – all that brings difficulties for Belarusan industry that is oriented at expert to the Russian Federation. Second serious factor are sanctions against Russia, which inhibits growth rate and inhibits the growth of export of Belarusan produce to Russia. So now is the time when we need to introduce structural reforms. Without them, it is impossible to live using the old model of economy that is oil-oriented and stimulates all other spheres by giving donations from the oil sphere. We should introduce structural reform so that the economy is not only oil, but so that other spheres would also recover and so that medium business is developing We need a different structure of economy that would be better oriented at market and less at state development incentives.