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June 20 – June 26, 2011

Funding of state programmes

The situation has not changed
Funding of state programmes

On 21 June Alexander Lukashenko has signed a Decree No 261 concerning the “Establishment of the JSC “Belarusian Bank for Development”. In 2011 – 2015 commercial banks of Belarus are asked to participate in the concessional lending to agricultural producers of Belarus (Decree No 256).

Comment

The government has taken a step forward towards formal implementation of obligations assumed within the IMF Stand-by Arrangements.

One of the conditions within the previous arrangements that were not fulfilled by Belarus was to set up a specialized agency for funding of state programmes (as well as competitive privatization of strategic assets).

Currently the two largest state banks: “Belarusbank” and “Belagroprombank” provide funding to state programmes.

With the creation of a new banking structure the entire system of financing of state programmes will be changed: the new institution will administrate all loans allocated for funding of state programmes.

The fact that commercial banks were invited to participate in financing of state programmes shows that the “Bank for Development” is a pro forma institution and that the government does not intend to cut down costs of the state programmes.

The decree neither lists banks, nor sets the amounts of loans to be issued by them. However, given the poor state of the majority of agricultural enterprises, commercial banks are unlikely to agree voluntarily on the participation in such programmes. Quite often “recommendations” bear obligatory nature in Belarus.

All in all, there is a significant progress in tightening of the monetary policy and in the desire to increase transparency and profitability of the state-owned banks.

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