Belarus counts on new loans to close international deficit

April 22, 2016 18:01

The National Bank of Belarus on December 12, 2011 increased the refinancing rate from 40% to 45%. By gradually rising interest rates the authorities fulfill the requirements of the ACF of the EurAsEC. Raised rates will significantly reduce business activity in the country and strengthen recessionary expectations.

The EurAsEC Anti-Crisis Fund will make the second transfer of $ 440 million to Belarus in December.

The National Bank forecasts that the volume of international reserves by the end of 2012 will amount to $ 7 billion. The main sources of foreign currency proceeds are projected from foreign direct investment ($ 3.7 billionfrom privatization), and from foreign borrowing by banks ($ 1.7 billion).

It is extremely important for the Belarusian authorities to receive all tranches of the USD 3 billion loan of the EurAsEC in 2011-2013 (USD 1.24 billion in 2011).

To this end the authorities are going to fulfill the requirements of the ACF and gradually raise the interest rates. On December 12, 2011 the National Bank of Belarus raised the refinance rate by 5 %, from 40% to 45%. At the same time interest rates for bank liquidity support operations were raised from 65% to 70% per annum.

Higher interest rates are still far from positive values as the annual inflation exceeded 100%. However this increase was enough to receive the following transfer of the EurAsEC Anti-Crisis Fund.

In the meanwhile increased rate becomes an additional factor that “cuts down” domestic demand from businesses and residents. Therefore 5% of the GDP growth will require significant emission injections, which will stir upinflation and will cause a new wave of devaluation expectations. The only way to achieve 5% of the GDP growth not via emission and in compliance with the EurAsEC and CES requirements is to increase exports by at least 10%, which is particularly challenging, given the low competitiveness of Belarusian enterprises.

 

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Image: TUT.BY

The Belarusian authorities are attempting to strengthen some elements of the ‘Soviet’ education to ensure the ideological loyalty of new generations to the state. Most likely, one of the major tasks of the educational reform is to prevent growing discontent with the existing education system among the population. The educational reform aims to strengthen centralisation and adjust the system to the needs of the public sector.

In Belarus, the Ministry of Labour and Social Protection and the Ministry of Economy would determine the university enrolment figures.

The Belarusian authorities do not seem to have a long-term vision of the educational reform. The education system changes depending on who leads the Education Ministry and has access to President Lukashenka. For instance, former head of pro-government communist party and Education Minister Igor Karpenko reintroduced some "Soviet" elements to the school and strengthened ideological components along with the de-politicisation of the curricula. Current generation of students and youth have not spoken against the authorities, unlike previous generations raised during the Gorbachev thaw and socio-political transformations of the 1990s.

In addition, the Belarusian authorities are attempting to adopt measures aiming to prevent discontent among the population with the Belarusian education system. The authorities are mobilizing those nostalgic for the USSR and propose to return to 5-marks grading system, school uniforms and reduced curriculum. The Belarusian leadership also aims to blur the growing social stratification in society and to relax social tension due to the growing income gap between the richest and poorest.

Should the authorities adopt plans to reduce university enrolment, they would re-certify universities in order to close some of them and would reduce competition from private educational institutions. The Belarusian leadership is attempting to adjust the education system to the needs of the real economy, to reduce pressure on the labour market and to cut government spending on higher education for specialists low in demand by replacing them with graduates of secondary vocational schools requiring less time to train.