5-percent GDP growth is harmful to the economy

Belarus’ the only major creditor at the moment, the EurAsEC Anti-Crisis Fund, has introduced new economic stabilization benchmarks. Although they limit the government’s abilities in terms of 5% GDP growth performance, the new indicators are rather decorative by nature and even if the Belarusian government fails to fulfill them, it will still be able to push for receiving the next tranche.

In the assessment of the Stabilization Programme implementation and conditions for the third tranche of the ACF loan dated June 5^th, 2012 the EurAsEC Anti-Crisis Fund warned against the potential decrease in the competitiveness of the economy if 5% GDP growth was achieved in 2012.

It has been assessed that out of 17 preconditions for receiving the third tranche, only 15 have been fulfilled. Two parameters remained unfulfilled: 1. to ensure that the population reimbursed at least 30% of the public services costs to the housing and communal services (HCS) in 2011 (actual performance is 25.9% by the end of 2011), 2. to ensure that transport tariffs for the population covered at least 70% of the transport services costs in 2011 (actual performance is 58% of the costs at the end of 2011).

Two more parameters were fulfilled symbolically. However, this did not result in the closure of the credit line and the next tranche had been disbursed. One of the new parameters, i.e. acceleration of overall bank loans in the economy calculated at programmed exchange rate on the date of signing of a letter of intent (June 13^th, 2012) was close to its threshold value (not more than 12% of the value on January 1^st, 2012) and will be exceeded by the reporting date.

Moreover, outstanding performance indicators are listed unchanged in the new letter of intent therefore it is very likely they will not be fulfilled again. Privatization conditions have been relaxed and restrictions on financing of state employees’ wages have been lifted.

Thus, one can say that the implementation of the next letter of intent would apparently be optional too and that the government will get free hands to accelerate the GDP growth and to raise wages progressively, which in turn will increase the risks of economic destabilization and result in resumption of corrupt practices with target figures of the past.