BELARUS NEWS AND ANALYSIS

DATE:

16/01/2007

EBRD approves new Belarus strategy

MINSK. Jan 16 (Interfax) - The Board of Directors of the European Bank for Reconstruction and Development (EBRD) has adopted a new two-year strategy for cooperation with Belarus from 2007-2008, the EBRD said in a press release.

On the economic front, the EBRD said that although macroeconomic management had improved, there had been very little progress in structural and institutional reform, a goal essential to achieving sustainable long-term growth.

The Bank said the law on "golden shares" giving the government the right to take control of private enterprises remained a serious concern, but welcomed the exclusion of the banking sector from the law's sphere of application.

Macroeconomic stabilization has advanced since the last Country Strategy, the release says. GDP grew to around 9%, and for the first time, the current account recorded a surplus of about 1.5% of GDP in 2005, although the trend is unlikely to hold in 2006. Belarus' external debt continues to be low, the release says.

However, this growth strategy is not sustainable in the long term, the release says. To ensure sustainable private sector-led growth over the longer term, fundamental market-oriented reforms and improvements in the country's business climate are needed. Yet Belarus has made little progress in advancing structural and institutional reforms since the last Country Strategy. The state continues to dominate the economic environment through budget and off-budget financing, support to enterprises through state-owned banks, and various targets imposed on enterprises.

As a result of the difficult conditions still present in Belarus, the Bank will continue to concentrate its operations in the private sector where its investments can have the greatest potential transition impact, the release says.

The Bank will maintain the three alternative scenarios as a graduated response to domestic circumstances, referred to as a Baseline, an Intermediate and a Regular Scenario. This approach is consistent with that adopted in previous Strategies, the release says.

As in the past, the Bank will remain ready to expand its operations outside the private sector, should domestic circumstances in Belarus allow. This Strategy identifies clear, measurable, political and economic benchmarks that the Bank will monitor regularly and specifies the operational response that could follow in the event of significant progress, the release says.

The EBRD has financed 11 projects in energy, transport, telecommunications, agribusiness, industry and in the banking sector in Belarus for 185 million euros as of September 2006, of which more than 75% was used in the financial sector. The EBRD provided financing of 41.5 million euros during its previous strategy from March 2004 to March 2006.

Source:

http://www.interfax.com/3/231253/news.aspx