Eurasian Development Bank provides to the Republic of Belarus the fourth tranche of financial credit of Eurasian Fund for Stabilisation and Development

29 June 2017

Moscow, 29 June 2017. Eurasian Development Bank, Resources Manager for the Eurasian Fund for Stabilisation and Development (EFSD), has transferred to the Republic of Belarus (RB) the fourth US $300 million tranche of the EFSD financial credit. Of the total of the US $2 billion credit committed to support a Reform Programme of the Republic of Belarus for 2016–2017, the amount disbursed to the country by now is US $1.4 billion (with the previous tranches included).

The decision to disburse the tranche was adopted by the Fund’s Council on 26 June 2017 and substantiated by the fact that all the Programme conditions had been met, except for one control indicator, for which a waiver was granted, and several indicators were added to the Programme to be met in the framework of the sixth and seventh tranches.

The indicator that has not been met sets the ceiling for non-project related government borrowing at 75% of the public debt repayment needs. In 2016, the actual mobilisation of funds was 101.4% of repayments. The waver is granted for this indicator as the country’s authorities have achieved notable progress in macroeconomic stabilisation through implementation of balanced economic policies.

For instance, the broad general government budget surplus was 0.5% of GDP in 2016, while budget deposits increased by an amount practically equivalent to the size of the surplus. The surplus was mainly generated through streamlining public spending. The wage bill growth in the budget sector decelerated from 17.5% in 2015 to 6.4% in 2016. Budget expenditures on support to state-owned enterprises demonstrated a notable decline: subsidies to compensate preferential interest rates went down by 11% owing to the net reduction of government programme financing by 1% of GDP; the off-balance sheet expenditures to execute guarantees and replenish authorised funds of enterprises declined by 12%.

The moderately tight macroeconomic policies implemented by the RB authorities throughout 2016 facilitated a fast decline in inflation, which was below the year-end target. Control over money supply by means of regular auctions to sell short-term bonds of the National Bank of the Republic of Belarus (NBRB), combined with the real interest rates for liquidity provision maintained at a positive level, helped contain the money supply growth in the economy within the targeted range as reflected by monetary indicators of the EFSD Programme. Tight fiscal policies also contributed to lower inflation through execution of the general government budget with a surplus. In addition, with the wage growth contained and the world commodity and food prices remaining low against the background of the nominal exchange rate appreciation, producers’ costs went down. As a result, although the NBRB set an inflation target of no more than 12% for 2016, the actual inflation as of end of last year went down to 10.6% compared to 12.0% as of end-2015. The inflation deceleration has significantly strengthened this year – as of end of May, the annualised inflation was 6.1%. The coordinated and consistent macroeconomic policies implemented by the authorities have resulted in a significant decline of not only the actual inflation, but also of inflation expectations that establishes a good foundation for improved efficiency of further policy measures aimed at reducing inflation and maintaining it at a low and predictable level.

The inflation deceleration and flexible exchange rate policies followed by the authorities have contributed to the real effective exchange rate depreciation by 8.3% in 2016 that improved the price competitiveness of Belarus’ exports. Higher exports due to stronger external demand in Russia was a key factor contributing to a lower rate of GDP decline, which changed from 3.9% in 2015 to 2.6% in 2016, despite the 21% drop of energy exports volumes.  In January – May 2017, the GDP growth was 0.9% due to continued high rates of growth of manufacturing and exports.

In the context of the improving price competitiveness of Belarus, the current account (CA) deficit declined by US $140 million, reaching US $1.7 billion in 2016 compared to US $1.8 billion in 2015. This trend of the CA balance improvement continued in early 2017 – in January-April, the CA deficit dropped by half, making 6.0% of GDP compared to 11.3% of GDP a year before.

The gross international reserves grew from US $4.1 billion to US $4.9 billion during the year, despite significant debt service payments. During the first five months of 2017, the gross reserves grew further, reaching US $5.2 billion as of 1 June 2017 (2 months of imports), against the background of continued net sales of foreign exchange by households. 

The Manager has received an updated Letter of Intent of the RB Government and the National Bank confirming that there are several control indicators added to the Programme to achieve the following objectives:

  • to develop a methodology to assess the fiscal risks generated by state-owned enterprises and prepare a report on such risks for 9 months of 2017 to serve as a basis for Government decision-making on reforming these enterprises;
  • to strengthen the managerial capacity of Supervisory Boards of open joint-stock companies (hereinafter – OJSCs), in which the state has a stake, by developing and launching training programmes;
  • to promote privatisation by introducing amendments to the Law on Privatisation of State-Owned Assets to reduce the period of limitation for privatisation transactions, and to adopt a Government Resolution aimed at reducing the list of OJSCs, to which the pre-emptive right of the state to by their shares applies;
  • to develop competition by creating a level playing field for enterprises of all forms of ownership and to lift barriers for competition in local goods markets by approving the Conceptual Framework of the Competition Development Programme;
  • to liberalise the foreign exchange regulation of exporters’ operations by bringing down the surrender requirement from 20 to 10 percent and lifting the requirement to enterprises to substantiate their purchases of foreign exchange.

Additional Information:

The Eurasian Fund for Stabilisation and Development (EFSD) amounting to US $8.513 billion was formed on 9 June 2009 by the governments of the same six countries. The objectives of the EFSD are to assist its member countries in overcoming the consequences of the global financial crisis, ensure their economic and financial stability, and foster integration in the region. The EFSD member countries signed the Fund Management Agreement with Eurasian Development Bank giving it the role of the EFSD Resources Manager.

The Fund’s Council acts on behalf of member states on all issues related to mobilisation of funds, investing, and using the Fund’s resources and any other issues related to the Fund. As of today, the members of the Fund’s Council are:

  • Anton G. Siluanov - Chairman of the Fund Council, Finance Minister of the Russian Federation
  • Bakhyt T. Sultanov - Minister of Finance of the Republic of Kazakhstan
  • Adylbek A. Kasymaliev - Minister of Finance of the Kyrgyz Republic
  • Abdusalom K. Kurboniyon - Minister of Finance of the Republic of Tajikistan
  • Vardan S. Aramyan - Minister of Finance of the Republic of Armenia
  • Vladimir V. Amarin - Minister of Finance of the Republic of Belarus

Eurasian Development Bank (EDB) is an international financial institution founded by Russia and Kazakhstan in January 2006 with the mission to facilitate the development of market economies, sustainable economic growth, and the expansion of mutual trade and other economic ties in its member states. EDB's charter capital totals US $7 billion. The member states of the Bank are the Republic of Armenia, the Republic of Belarus, the Republic of Kazakhstan, the Kyrgyz Republic, the Russian Federation, and the Republic of Tajikistan.

EDB Media Centre:
+7 (727) 244 40 44, ext. 6147 (Almaty)
+7 (495) 645 04 45 ext. 2724 (Moscow)

Related materials:

EFSD Council approves financial credit to the Republic of Belarus
Eurasian Development Bank disburses the second tranche of the financial credit of the Eurasian Fund for Stabilisation and Development to the Republic of Belarus
EDB extends the third tranche of the EFSD credit to Belarus