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Business

Minsk to receive almost two billion euros IMF aid

Latest update : 2008-12-31

The International Monetary Fund has tentatively agreed to a 15-month loan of 1.8 billion euros to Belarus to help it cope with the global financial crisis, despite the country having been described as the "last dictatorship" in Europe by the US.

AFP - The International Monetary Fund on Wednesday said it had tentatively agreed to an emergency 2.5 billion dollar loan to Belarus to help it cope with the global financial crisis.
  
IMF managing director Dominique Strauss-Kahn said an IMF staff mission and the Belarus authorities had reached agreement on an economic program to be supported under a 15-month IMF standby loan of about 2.5 billion dollars.
  
"The strong measures that the authorities are taking justify the exceptional level of access to Fund resources ... and deserve the support of the international community," he said.
  
The agreement is subject to approval by the IMF management and the executive board.
  
The IMF said the loan agreement could go before the executive board in mid-January, and Belarus would be able to draw on about 800 million dollars immediately after board approval.
  
The United States, by far the largest voting power in the 185-nation institution, has branded Belarus "Europe's last dictatorship."
  
The unusually large amount of the loan is about 420 percent of Belarus's quota, the maximum amount an IMF member country pays to finance the Washington-based institution.
  
Normally an IMF member country can draw up to 100 percent annually of its quota, and 300 percent cumulatively. However, the IMF has granted exceptional access to financing to distressed countries, such as a loan to Georgia in September after its armed conflict with Russia.
  
Strauss-Kahn noted that Belarus's international reserves had declined due to falling demand from trading partners and difficulties in accessing finance as the credit squeeze sent economies into a tailspin.
  
"The authorities are now taking strong actions to stop the decline in reserves, restore economic stability, and lay the groundwork for a resumption of high growth," he said.
  
"The Fund-supported program will help Belarus achieve an orderly adjustment to the external shocks that it is facing and offer protection against its most pressing vulnerabilities."
  
As the global financial crisis that began in advanced countries in August 2007 erupted into a firestorm in September, a growing number of emerging market countries have sought financial assistance from the IMF.
  
New loans worth more than 40 billion dollars have been approved for Ukraine, Iceland, Pakistan, Hungary and Latvia.
  
Strauss-Kahn said the agreement with Belarus includes a strengthened monetary and exchange rate policy framework, cuts in public investment and directed lending by banks, public-sector wage restraint and an improved social safety net.
  
The central bank of Belarus, a former Soviet republic with a Soviet-style economy, indicated on October 22 that the country had sought an IMF loan of two billion dollars.
  
Belarussian President Alexander Lukashenko in mid-November threatened to quit the IMF if the loan request were rejected, saying such a refusal would be politically motivated.
  
Lukashenko recently has outlined plans to privatize hundreds of companies and attract foreign investors. According to the World Bank, less than 10 percent of the economy is generated by the private sector.
  
But the president also has emphasized that there will be no overnight shift from the country's economy to private ownership as happened in Russia, saying his country will follow the Chinese model instead.
  
In a report published in September, the World Bank said Belarus was "a global leader in regulatory reforms" and elevated the country's ranking as a good place to do business to 85th from 115th in 2007, higher than Russia's ranking.

Date created : 2008-12-31

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