Belarusian economic stability again threatened by credit expansion - EDB
MINSK. Feb 1 (Interfax) - The Eurasian Development Bank (EDB), which manages the Eurasian Economic Community (EurAsEC) Anti-crisis Fund, has said credit expansion in Belarus has to be restrained due to the risks of weakened balance of payments and quickening inflation.
The manager of the funds expresses concern at the still excessive level of credit expansion. Efforts to stabilize the economy have to be continued, so as to achieve a future deceleration of inflation, the current level of which presents itself as extremely high. Its further reduction is required by means of supporting strict monetary-credit and tax-budgetary policy, which will increase the predictability of the economic situation and favorably influence the perception of country risk by investors and creditors, an EDB press release says.
The appreciable deterioration of the country's trade balance since the second half of last year also speaks to the necessity of continuing efforts to stabilize the economy. In these conditions, the continuation of credit expansion will lead to a new quickening of the rate of inflation, again weaken the balance of payments, and complicate the resolution of the task of growing the country's gold and forex reserves to an economically safe level, the bank says.
In accordance with a decision made by the Fund's council, the EDB and Belarusian authorities have begun preparing a letter of intent for 2013, in which will be coordinated conditions for extending subsequent tranches, including measures aimed at the continuation of strict monetary-lending policy, which should provide a future brake on inflation and improvement of the country's investment prospects, the EDB says.
The EDB issued Belarus the latest ($440 million) tranche of a financial credit out of the Fund's coffers on Thursday.
The EDB notes the effectiveness of government and National Bank of Belarus efforts to fulfill the stabilization program, which led in 2012 to a sharp drop in inflation compared with the extremely high levels seen the year before (21.8% versus 108.7% in 2011), a significant reduction of the current operations account deficit (2.8% of GDP in 2012 versus 10.5% in 2011), and the replenishment of international reserves to a level equal to almost two months of the country's imports, is how the bank explained the decision.
In line with obligations the Belarusian authorities assumed in the context of a letter of intent to fulfill the stabilization program coordinated with the Anti-crisis Fund, growth in banks' requirements of the economy should not exceed 15% in 2012. According to the National Bank of Belarus, actual growth in those requirements was 37% last year.
The Fund council decided to extend Belarus a stabilization credit of $3 billion in June of 2011. This credit was to be disbursed in six tranches in 2011-2013. Belarus received three for a total of $1.68 billion in 2011-2012.
The decision to issue the tranche was made by the Anti-crisis Fund council last December 7 on the basis of an evaluation of Belarus's fulfillment of all the control indicators of the fourth tranche as of October 1 of last year.
With the issuance of the fourth tranche, the amount Belarus has received has risen to $2.12 billion.
Aside from this tranche, which by the payment schedule should have been received in Minsk last October, Belarus is looking to secure another two tranches totaling $880 million. EurAsEC Anti-crisis Fund monies in that amount are included among the sources of financing for the republican budget deficit in 2013, which per budget law should be implemented without a budget.