Anti-Crisis Fund Loan Might Accelerate Privatization Process

April 22, 2016 18:25

On January 31st, Belarus received the EurAsEC Anti-Crisis Fund’s fourth tranche.

The decision to grant the credit tranche was announced on December 7th, 2012, but the tranche has been received only on the last day of January 2013. The delayed transfer from Russia meant to demonstrate to Belarus the potential consequences of further protraction with privatization. Before the negotiations about the fifth tranche start, the number of joint ventures emerging is expected to increase.

On December 7th, Russian Finance Minister Anton Siluanov said a positive decision about the allocation of the next EurAsEC Anti-Crisis Fund tranche had been made. Formally, Russia, which is the Fund’s major donor, did not focus on the non-fulfillment of one of the main indicators - growth in the volume of lending to the economy. According to the 2013 forecast, Monetary Indicators’ growth is limited to 17-23% of the volume issued by January 1st, 2012, but by 2013 the growth was 37%, which could become a reason for non-issuance of the next tranche.

Finally, the tranche was allocated on 31st January, which will adjust the gold reserves’ January 2013 performance (the tranche will be calculated into the gold reserves). The delay was explained by technical problems with promissory notes conversion. De facto, technical problems were artificial and intended to demonstrate to Belarus the leverage in privatization matters. The fifth and sixth tranches have been incorporated in the 2013 Belarusian state budget and their potential non-disbursement will create a budget deficit, requiring costs-cuts by an equivalent amount.

Privatization worth USD 2.5 billion in 2012 was a requirement set by the Anti-Crisis Fund. In mid-2012, the obligation for the sale of state property worth USD 1.2 billion in the first 9 months of 2012 was repealed, and the sale of the state property worth USD 2.5 billion has been linked with the fifth tranche (negotiations about the fifth tranche will begin in late February 2013). This requirement is not formally binding, but it is the key to a decision about the tranche allocation. Belarus did not fulfill the state property sale condition in 2012 either.

Thus, to obtain a new tranche Belarus should either provide guarantees of the state property sale worth a certain amount, or agree to the establishment of several joint ventures, which will be treated by Russia as fulfillment of tranche requirements. Belarus’ reluctance to privatize state property may result in “technical problems” with funds transfer, which, coupled with substantial payments on public debt can increase foreign exchange market risks in Belarus.