10 April 2020, Friday, 20:49
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Alex Kremer: Belarus Made Two Steps Out Of Three Towards Financial Crisis

Alex Kremer: Belarus Made Two Steps Out Of Three Towards Financial Crisis

The head of the World Bank representative office is telling about the problems of luconomy.

Belarus needs an independent assessment of the state-owned enterprises in order to decide on their fate. Delaying the solution to this problem generates additional risks, said Alex Kremer, head of the World Bank’s representative office in Belarus, at the 100 Billion Reform media breakfast organized by the IPM Research Center with EU financial support, tut.by reports.

“Belarus reminds a family that spends more than it earns. Why? Because half of the family is unproductive - these are state-owned enterprises. And what happens if someone spends more than earns? First, there is a long stage of stagnation; the World Bank spoke about it two years ago in relation to Belarus. We warned that the outlook for revenue growth would be low without restructuring the economy. The second stage is vulnerability to the resulting debt. Belarus is now at this stage. The third stage - I hope Belarus will never be there - is a financial crisis arising from problems in relations with creditors,” said Alex Kremer.

He is sure that now the key question for Belarus is to minimize the risks of transition from the second stage to the third.

“One of the key risks is that state-owned enterprises are not able to service their debt. A significant part of the debt is the debts of state enterprises, taken to cover the losses of past periods. The second risk - the banking sector may find itself in a situation where it cannot manage its balance, the third - the National Bank may not be able to restrain the loss of its reserves due to external pressure,” said the representative of the World Bank.

He emphasized that the global recession, which is now being discussed more and more loudly, remains one of the most important risks for Belarus. Such a recession will negatively affect not only Belarus' exports, but also, as the experience of 2008 showed, the ability to attract resources, since during the recession, international lenders tend to withdraw their funds into more reliable assets - gold, securities of developed countries.

The solution to the problem of the discrepancy between spending and earnings is to spend less, earn more. The World Bank noted the serious successes of the National Bank and the Ministry of Finance in solving the first part of the equation, reducing spending. Alex Kremer even congratulated the Ministry of Finance “on the fact that they managed to stabilize the budget deficit in a rather difficult situation”.

But in order to earn more, structural reforms are needed - they will release the country's growth potential. “It is necessary to start with the public sector - this sector uses labor resources and capital much less efficiently than the private sector. Our recommendations are often caricatured - privatize everything or close everything. This is far from the case. But an independent assessment of the state and potential of state-owned enterprises is necessary,” summarized Alex Kremer.