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Lukashenka Upscales Debts

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Lukashenka Upscales Debts

"Ostrich-like" position of the authorities sweeps problems under the carpet and aggravates them.

Since the beginning of the year the Belarusian debt has increased by almost 10%, the economy continues to generate losses. The authorities have to cover old debts at the expense of new loans.

The the Belarusian budget got next $300 million from the Eurasian Fund for Stabilization and Development (EFSD) on Friday . It will be recalled that the loan decision was taken this March. Funds were directed at market reforms which should stabilize the situation in the economy. The first tranche of $500 million was provided in March. The entire loan is $ 2 billion, the entire sum is divided into seven tranches, which are to be paid out within two years.

Providing comments to Nezavisimaya Gazeta on other tranche experts note that Belarus takes no reforms and the economy bears new losses. According to the National Bank, in August the country has to pay $1 billion. Experts believe that the loan of $300 million will be spend on the repayment of the debt as well. According to statistics, the foreign debt of Belarus amounts to $13 billion. GDP equals to $18 billion. The country's economy continues to stagnate. Within six months the economy lost 2.5%.

However, the government argues that the economy perks up, but statistics show that it the decline only slows down from month-to-month. Local economists argue that such "ostrich-like" position sweeps problems under the carpet and aggravates them. In particular, the banking system of the country is in jeopardy. Leading banks are rapidly losing profits - up to 20% within six months. Whilst the number of toxic assets is getting higher. As of July 1, they accounted to 13.4% and since the beginning of the year they have doubled to $2.7 billion, according to experts, we have "hit the all-time high".

The government does not want to admit that it is necessary to change the structure of the economy, and continues to require to increase production volume. Companies have to take loans amid absence of their own resources. However, they cannot sell products and return loans, and thus the problems of enterprises start to weaken the banking system.

"Enterprises cannot repay loans, due to lack of markets and, consequently, income,» former head of the National Bank Stanislau Bahdankevich says. According to him, the debt chain will be on, and this poses a threat to private deposits. "The increase of toxic assets jeopardizes private deposits, some part of loans provided by banks are taken from these funds. If enterprises do not repay loans, people may not have their money back," the expert says.

Stanislau Bahdankevich sees no positive movements. "I think the increase in toxic assets will continue, there is no recovery in the economy. Fundamental reforms are needed. It is necessary to change the control system at enterprises and the economic model of development, reduce costs, attract investment, but nothing has been done", he says.

The state does not focus attention on it, but now here and there some information about the bankruptcy of well-known comes out. For example, yesterday it became known that the bankruptcy proceedings were initiated in respect of the largest importer of fruits and vegetables. Others may follow the scenario. Costs of companies grow and the government does not allow to increase prices. Customer’s affordability is getting less as well. Sewing companies are facing bankruptcy.

Last week the National Bank admitted that the real sector, which was ineffective, posed the main threat to the country's economy. According to bank experts, the real sector of Belarus requires "improvement of supervision of activity of state enterprises, improvement of corporate management and task sharing between a regulator and an owner." But no signs of realization of such scenario are observed.

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