Belarus seeks IMF programme as debt crisis looms

By bne IntelliNews June 26, 2015

Sergei Kuznetsov in Kyiv -


In another attempt to escape its debt crisis, Belarus is in talks with Russia to restructure earlier loans, obtain extra funding with a Russia-led bail-out institution, and agree a $3.5bn support programme with the International Monetary Fund (IMF), Finance Minister Vladimir Amarin said on June 26.

An IMF mission will arrive in Minsk in July, when the "drafting of a new programme will be discussed", Interfax news agency quoted Amarin as saying.

Belarus has been trying to negotiate a new support programme with the fund since late 2010, when a previous $3.46bn aid programme for the former Soviet republic expired. 

Alexander Mukha, a Minsk-based independent financial analyst, believes the "political aspect" could play "a crucial role" in an IMF decision on a further credit, as it will have to be approved by Western representatives on the IMF Executive Board.

Sanctions imposed by the EU and the US are currently in place against some Belarusian officials and companies because of the country's poor human rights record. However, over the past few months there has been some improvement in relations between the West and Belarus. While still regarded as authoritarian and even dictatorial, the government under long-time President Alexander Lukashenko has won praise for facilitating multilateral peace negotiations over the Ukraine crisis.

"Western nations can ease their stance towards Belarus due to the country's peace afforts," Mukha told bne IntelliNews. He also underlined that Belarus recently sucessfully finished its repayment of the earlier $3.46bn loan. "The country has a positive credit history and that could have positive impact."

Reform pledge first, then money 

The IMF said in its country report published on May 29 that the multinational lender had "noted" the authorities’ interest in a new programme.

"Recognising the benefits it could bring to the country, directors [of the IMF's board] underscored that any future arrangement would require a credible and strong commitment at the highest level to a comprehensive package of deep structural reforms and consistent macroeconomic policies," the lender's statement reads.

In April, the Belarusian authorities proposed to the IMF a "road map" of structural reforms to be undertaken over the next five years, Economy Minister Vladimir Zinovsky told bne IntelliNews.

Under this "road map", the government intends to abandon price regulation for "socially important goods" in Belarus. It will also introduce full liability to housing and utilities payments for the general population.

On the other hand, with the aim of softening possible shocks that could result from the reforms, the authorities said they are planning "to improve the system of targeted social support for vulnerable groups and support mechanisms for unemployed people".

Belarus has reached the peak of its foreign debt repayments and the government is facing a serious shortage of funding. The country is required to pay $4bn this year, while its foreign currency reserves stood at just $4.6bn as of the beginning of June.

The IMF said in its report that the Belarusian authorities should adopt and implement decisively "an ambitious, well-sequenced" reform agenda. In particular this should include price liberalisation, measures to introduce full liability to housing and utilities payments for the general population, steps to phase out mandatory targets for enterprises, and privatisations in the corporate and banking sectors.

Russian cash and Eurobonds

The country is also negotiating a new loan with the Russia-led Eurasian Fund for Stabilisation and Development, or EFSD, which is the former bail-out fund of the Eurasian Economic Community (EurAsEC). Amarin said the EFSD will consider Belarus' request in July. "The amount [of the EFSD loan] is not determined yet," he said on June 26.

The Belarusian government is also negotiating with Russia the refinancing of its state debt repayments scheduled for 2015. Restructuring includes both inter-state debts as well as money owed to the EFSD, which rescued Belarus from a balance-of-payment crisis in 2011 by issuing a $3bn support package.

Earlier in  June, Russian's ambassador to Belarus Alexander Surikov said Moscow is considering restructuring up to $1.2bn of the republic's debt in 2015.

The analyst Mukha says that the foreign reserves of Belarus will dwindle sharply on August 3 when the government is due to repay a $1bn Eurobond issued in 2011. The fall in the international reserves drop will "stimulate" government efforts to secure new funding from the international donors, he added.

Meanwhile, Amarin said that Belarus also plans to tap international debt market with at least a $1bn Eurobond sale at the beginning of 2016, BelTA news agency reported.


Related Articles

Austria's Erste rides CEE recovery to swing to profit in Jan-Sep

bne IntelliNews - Erste Group Bank saw the continuing economic recovery across Central and Eastern Europe push its January-September financial results back into net profit of €764.2mn, the ... more

EU, US partly suspend Belarus sanctions for four months

bne IntelliNews - The Council of the European Union (EU) has suspended for four months the asset ... more

bne:Chart - CEE/CIS countries perform particularly well in World Bank's "Doing Business 2016" survey

Henry Kirby in London - Central and Eastern Europe and the Commonwealth of Independent States’ (CEE/CIS) countries performed particularly well in the World ... more