Belarus looks for options as another crisis looms

By bne IntelliNews April 5, 2013

bne -

Belarus has opened talks with the World Bank over its budget as the country seeks to reopen financial support from the West - a bid to weaken Russia's position as yet another fiscal crisis looms in Minsk.

The World Bank's Qimiao Fan met the head of the Belarusian parliamentary budget committee on on 4 April in Minsk, where the institution presented its second Public Expenditure Review, reports Belta. During the meeting, the pair discussed optimizing Belarus' spending.

"Following the World Bank recommendations, Belarus will stick to tough monetary policy, reduce state support for individual government programmes and create conditions conducive to business growth in Belarus," Dobrynina said.

Roughly translated, that means Minsk will toe the line due to its desperate need for cash, in a bid to persuade the World Bank to hand it a credit line. Belarus needs to find sources of financing to cover debt repayments and avoid another currency crunch. According to the Finance Ministry, Minsk needs to find $3bn to service external debt liabilities in 2013, which is equal to 54% of GDP.

It hopes to secure around half of that sum via Eurobond issues and $800m in tranches of the ongoing bailout agreed in 2010 from the EurAsEC Anticrisis Fund - a Russian-led rescues fund set up by the CIS countries.

Meanwhile, it also hopes to agree another $2bn loan from Russia. Yet, Moscow's penchant for pressing on the pressure points of its neighbours is well known in both Belarus and Ukraine, and Minsk is unlikely to receive a swift bank transfer without making concessions. In 2010, with the currency circling the bowl and the country's shelves emptying, Belarus was forced to agree to sell Russia its oil pipelines - a strategic asset that provides a major export route for Russian crude to Europe.

Minsk spent years playing Russia and the West off against one another. For instance, Belarus has agreed six cooperation programs with the World Bank since joining in 1992. However, the political clampdown in the wake of the protests over the 2009 presidential election, which continued Alexander Lukashenko rule, saw the EU and US implement sanctions against Minsk officials. Relations have been in the deep freeze ever since.

That left Lukashenko little option but to hand Moscow the oil pipelines when the last crisis hit the country. With a similar storm brewing - Belarus has similarly high debt repayments in 2014, and the balance of payments this year is likely to be weaker than in 2012 - Minsk clearly needs to give itself an alternative play to weaken the Russian position, or risk having to hand over more assets.

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