IMF wants to see real economic changes, not illusionary reforms
IMF mission was working in Belarus on March 14th – 25th.
Belarus has once again showed interest in the IMF credit resources. A draft concept for Belarusian economic reforms programme is being developed, if adopted it could attract a new IMF loan. The main stumbling block for a new IMF loan programme is a special attitude to economic reforms by Belarus’ authorities.
In January-February 2013 Belarus paid USD 530 million off its USD 3 billion international public debt repayable in 2013, the IMF share is USD 1.6 billion. Prospects for Belarusian Eurobonds on international markets are uncertain due to the situation in Cyprus. The only guaranteed international inflow in 2013 is the EurAsEC Anti-Crisis Fund’s loan tranche. Complicated negotiations with ACF representatives, spasmodic allocation of the promised funds and the lack of alternative borrowing sources push Belarus towards seeking for alternative loans. The IMF is one of the potential donors, but the fund’s loan programmes are subject to certain economic reforms requirements.
On March 28th, 2013 the government announced the elaboration of the economic reforms programme concept for Belarus. The ultimate goal of this program is to attract the IMF loan. Statements by Economy and Finance Ministries representatives implied that potential reforms will be cosmetic, not changing the country’s economic model. The concept will be presented at the spring session of the Boards of Governors of the IMF and the World Bank in April 2013.
The IMF believes, the inflated target for GDP growth in 2013 (8.5%) is incompatible with the aims to contain inflation at 12% in 2013, which is a major obstacle to the new credit program. There are political obstacles to obtaining the IMF loan, but they are not crucial for the new loan programme with the IMF. Cosmetic economic changes are insufficient amid the lack of progress in privatization and curbing the state’s interventions in the economic processes in the country. As a rule, state control over the economy is loosened only during the crisis and is resumed when the situation stabilizes.
Thus, any economic reform programmes in Belarus are limited by the leadership’s views on the economic processes in the country. Full control over economic processes, preserving the state sector, active interferences at the privatized enterprises, the revision of privatization transactions, - all this is contrary to the IMF lending standards and pre-doom any such reform programs to fail.
Over the past year, military-political relations between Minsk and Kyiv have become complicated. Due to their high inertia and peculiarities, this downward trend would be extremely difficult to overcome.
The root cause of the crisis is the absence of a common political agenda in the Belarusian-Ukrainian relations. Minsk is looking for a market for Belarusian exports in Ukraine and offers its services as a negotiation platform for the settlement of the Russo-Ukrainian war, thereby hoping to avoid political issues in the dialogue with Kiev. Meanwhile, Ukraine is hoping for political support from Minsk in the confrontation with Moscow. In addition, Ukraine’s integration with NATO presupposes her common position with the Alliance in relation to Belarus. The NATO leadership regards the Belarusian Armed Forces as an integral part of the Russian military machine in the western strategic front (the Baltic states and Poland). In addition, the ongoing military reform in Ukraine envisages a reduction in the number of generals and the domestic political struggle makes some Ukrainian top military leaders targets in politically motivated attacks.
Hence, the criticism of Belarus coming from Ukrainian military leadership is dictated primarily by internal and external political considerations, as well as by the need to protect the interests of generals, and only then by facts.
For instance, initially, the Ukrainian military leadership made statements about 100,000 Russian servicemen allegedly taking part in the Russo-Belarusian military drill West-2017. Then the exercises were labelled quazi-open and military observers from Ukraine refused to provide their assessment, which caused a negative reaction in Minsk. Further, without citing specific facts, it was stated that Russia was building up its military presence in Belarus.
Apparently, the Belarusian and Ukrainian Defence Ministries have entangled in a confrontational spiral (on the level of rhetoric). Moreover, only a small part of the overly hidden process has been disclosed. That said, third states are very likely to take advantage of the situation (or have already done so). This is not only about Russia.
The Belarusian Defence Ministry officials are restrained in assessing their Ukrainian counterparts. However, such a restraint is not enough. Current military-political relations between Belarus and Ukraine are unlikely to stabilise without the intervention of both presidents.