Fund run by Russia in talks with Belarus about aid, but wants reforms

Vehicles drive on a ring road around Minsk, Belarus March 5, 2020. REUTERS / Wassily Fedosenko / File Photo

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MOSCOW, Nov. 24 (Reuters) – The Russia-led Eurasian Stabilization and Development Fund (EFSD) is in talks with Belarus over financial assistance, but wants the country’s scarce country to initiate reforms before it disburses money, said the manager of the fund, called Andrey Shirokov.

Western sanctions, imposed last year for a widespread crackdown on street protests, have made borrowing in international markets on market terms expensive for Minsk, which as of November 1 had $ 8.55 billion in international reserves.

“We are in talks with Belarus about a potential government and central bank program to support its budget and balance of payments,” Shirokov said in an interview with Reuters.

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The European Union, United States, Great Britain and Canada imposed sanctions on Belarus last year for cracking down on street protests against a rigged presidential election – a claim the Belarusian authorities deny. [nL1N2J31GS] [nL8N2I54IN]

Relations with the West have deteriorated further this year after a passenger plane flying over the country was forced to land and a dissident was arrested on board. Minsk is also currently in a stalemate with the EU over migrants. [nL5N2O633U] Continue reading

The EFSD, a regional institution that aims to provide financial assistance to its member states, which include Belarus, can provide funds to the country on favorable terms and has no deadline to approve a grant package, Shirokov said.

The fund’s credit limit for Belarus is $ 1.79 billion, but it could be changed by reallocating funds from other member states, Shirokov said.

The EFSD called on Belarus to implement reforms to stimulate economic growth in order to release the funds.

To this end, he recommends Belarus an inflation-oriented monetary policy, a balanced budget policy and a limit on the debt level. She also wants state-owned companies to be reformed, said Shirokov.

Belarusian President Alexander Lukashenko asked his Russian counterpart Vladimir Putin in August to provide him with $ 1 billion through the Eurasian Development Bank (EDB), which manages the funds of the EFSD, after the Belarusian economy was affected by the COVID-19. Pandemic had hit crisis and western sanctions.

Belarus received a pre-approved $ 930 million from the International Monetary Fund shortly after Lukashenko’s application to Moscow. That made the credit problem in Belarus “less acute” but not resolved it, said Shirokov.

“This amount is not enough, the need is higher,” he said.

Belarus is facing financial bottlenecks over the next three years, the size of which the EFSD is currently assessing, while its economy has the medium-term potential to grow by only 1% per year after shrinking 0.9% in 2020, Shirokov said.

“The country cannot afford to maintain high social spending. There are two options here – either reforms to increase potential and actual economic growth, or cut spending, ”said Shirokov.

Russia is the EFSD’s largest donor, but Shirokov said Moscow cannot make its own decisions on its behalf. The fund was set at $ 8.5 billion in 2009 and has increased by approximately $ 1 billion since then.

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Letter from Andrey Ostroukh; Editing by Ana Nicolaci da Costa

Our Standards: The Thomson Reuters Trust Principles.

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