Reforms needed: Eurasian Development Bank warns Belarus of risks

The unbalanced growth of salaries and the unstability of its payment balance are major threats to the economy of Belarus, the Eurasian Development Bank (EDB), says.

An expert group from the EDB, visited Minsk on 2-5 October with a programme monitoring mission and consultations on amending the government’s reform programme supported by the EFSD financial credit, as regards the measures necessary to be fulfilled for the final, seventh tranche of the credit.

In March 2016, the EDB, acting as the Resources Manager of the Eurasian Fund for Stabilization and Development, and Belarus’ Finance Ministry signed the agreement on $2 bn credit to support the reform programme of the country. Last week the Eurasian Development Bank extended the sixth tranche of the EFSD financial credit, totalling $200 million, to Belarus. Minsk got it with a year’s delay receiving the funds just before the meeting of Alyaksandr Lukashenka and Vladimir Putin in Mahiliou.

To get the final tranche, the Belarusian side should refine the reform programme, the group stresses.

“As a result of consultations held during the visit, a preliminary list of amendments to the reform programme supported by the EFSD financial credit as concerns the seventh tranche. The refinement of tranche conditions became necessary because of the postponement of the date for checking compliance with these conditions from 1 January 2018 until 1 December 2018,” the statement reads.

The ERB experts strongly recommended the Belarusian finance to take into account the current and anticipated macroeconomic trends and risks identified:

“An unbalanced growth in salaries and the reduction in the real refinancing rate have resulted in an accelerated increase in domestic demand, the impact of which was partly compensated by consumer and investment imports that have led, among other things, to the worsening of the current account. Over the first seven months of the year, the current account deficit widened to 2.5% of GDP, compared to 1.0% of GDP in the same period of 2017.”

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