Lack of Control in the Economy

The IMF insists on comprehensive overhauls in Belarus.

The IMF's mission runs in Minsk now. The Belarusian government wants to get the credit and has hoped that the credit programme of the IMF has been launched this year. But it did not happen: now they hope for the first billion of dollars in 2017, naviny.by writes.

The Credit Would Be Helpful in Settlement of Previous Debts

Other mission of the IMF has started on June 21 and lasts 10 days. Its formal objective is the consultation with the government on economic policy (according to the IMF's regulation, such consultations are of annual nature).

However, the Belarusian side expects more. The economy minister Uladzimir Zinouski and the finance minister Uladzimir Amaryn informed journalists last week that they expected a new credit programme after negotiations with experts of the Fund.

According to BelaPAN, the macroeconomic forecast for 2017 being prepared by the Belarusian government implies the IMF's credit of $1 billion next year.

Next year Belarus' foreign and domestic obligations will be equal to about $3 billion. In case of the attraction of the IMF's credit, the third part of payments will be refinanced by a new credit.

The question is whether the IMF will allow the credit. The Belarusian government expected the programme with the Fund in the end of 2015, however, it did not occur.

According to unofficial data, this spring the Chairman of the National Bank Pavel Kallaur and Prime Minister Andrei Kabyakau signed the scenario of preliminary measures required for conclusion of the new credit programme with the IMF. The Belarusian Finance Minister has recently stated that the preconditions for the credit were met.

Meanwhile, representatives of the Fund who held a public lecture last week in Minsk did not comment on the statement of the Belarusian party.

It looks like the main part negotiating process is still ahead, and Amaryn indirectly confirmed it last week. He informed journalists that it would be "too optimistic" to expect the first tranche of the new credit of the IMF that year.

The activity and statements of the Belarusian government prove that the official Minsk really counts on this money. It is proved by the fact that the Finance Ministry has started to prepare documents necessary for new Eurobonds. Earlier the government stated that the new issue of Eurobonds was expected after the conclusion of the programme with the IMF which could allow to attract cheaper money in the international market.

The IMF's Requirements

Apparently, the Belarusian government is to face months of tough negotiations to reach the new programme.

Economic difficulties push the authorities toward negotiations with the IMF, Director of the IPM Research Center Aliaksandr Chubryk believes.

"Economic problems require a solution either with the IMF's money or without it. Industrial enterprises are in a precarious financial situation, against this backdrop banks constantly face increasing risks; the new credit programme with the IMF is very desirable to let the situation in the economy stay manageable," Chubryk says.

According to him, there are few ways which could assist Belarus to solve problems in the economy without credits, although such scenarios are being discussed.

By the way, in public newspapers ex-Presidential Adviser Siarhei Tkachou insists on expansion of a credit line which can provide for the recovery of the economic growth in the country. Specialists of the National Bank in their turns, commenting on Tkachou's suggestions, say that other pumping with money may have negative impact including bad debts of enterprises and the loss of financial stability.

"The return to emission practice, I think, is unlikely. In 2000s when we used it, the economy annually boosted up to 10% of GDP in the form of energy benefits and today we cannot agree upon the discount on gas with Russia. Over 10 last years debts have significantly increased. The situation with an active use of the printing press is the old story," Chubryk believes.

According to him, there are chances to negotiate upon the new credit line with the IMF, because the government and the National Bank aim at provision of macroeconomic stability.

Research worker of BEROC Dzmitry Kruk, in his turn, stresses that "the IMF is interested in comprehensive overhauls in the real sector which involves restructuring, privatization and bankruptcy of enterprises. These are mandatory conditions."

Thaw in political relations between Belarus and the West can have a positive impact on negotiations, the economist says. However, first of all the result will depend on the willingness of the official Minsk to carry out comprehensive overhauls.

"A root problem of the Belarusian economy is in the real sector. If the IMF does not see concrete steps towards reformation of state-owned enterprises, the Belarusian programme with the Monetary Fund could be discussed even for years," Kruk believes.