Belarus must curb state-backed lending as the country seeks a third disbursement from a Russian-led $3 billion bailout loan, said Sergey Shatalov, who oversees the anti-crisis fund that provided the credit.
“Clearly they can’t maintain the level of credit to the economy which was the case in 2011,” Shatalov, managing director of the Eurasian Economic Community’s rescue fund, said in an interview in Moscow today. “It fuels inflation, and it’s the main driver for the balance of payments deficit.”
Belarus, whose currency depreciated 64 percent against the dollar last year as inflation soared to 108.7 percent, should curtail state lending to the economy to 1 percent of gross domestic product by next year, Shatalov said. Government deposits with banks are still fueling credit growth after the central bank stopped making direct loans in June, he said.
“The government implemented a program that clearly moved the country toward a turnaround,” Shatalov said. “The stabilization has begun, but it hasn’t yet been concluded.”
The former Soviet republic received the second bailout tranche of $440 million last December following a payment of $800 million in June. Belarus also wants to secure a new loan from the International Monetary Fund and extend payments on its $3.8 billion debt to the Washington-based lender, central bank Chairman Nadezhda Ermakova said last month.
Policy makers in the capital Minsk are drafting new economic targets in the so-called letter of intent for approval with the Russian-led emergency fund, which will be used to determine when a third tranche of the loan is released, Shatalov said.
Belarus is conducting a review after inflation surged above 100 percent and the government balanced its budget, exceeding a planned deficit of 1.5 percent initially agreed, Shatalov told reporters.
“One of the difficult questions is how the inflation targets will be reached,” he said. Under the bailout accord, Belarus is supposed to sell $2.5 billion in state assets, the same as last year, he said.
The anti-crisis fund, which agreed to provide the $3 billion loan to Belarus in June, is managed by Eurasian Development Bank. Both the fund and the bank are Russian-controlled.