EBRD not to provide financial assistance to Belarusian government

The European Bank for Reconstruction and Development (EBRD) has announced that it doesn't plan to provide direct financial assistance to the Belarusian government and will limit its support for Belarus to municipal infrastructure projects.

"The Bank will ensure that no support, either financial or technical, will be extended to the Belarusian central authorities or central state in any manner," the EBRD says in a draft country strategy for Belarus for the period between 2013 and 206. The draft is expected to be adopted on March 12.

This entails the exclusion from consideration of any large-scale public infrastructure lending, including in the areas of transport and power infrastructure, as well as direct participation in privatization of state assets through purchase of shares owned by the state or state entities, the Bank says.

The EBRD "remains seriously concerned about the uneven progress Belarus made toward the application of principles of multiparty democracy and pluralism during the previous Strategy period." "The Belarusian state continues to play a dominant role in the country’s political and economic life," the Bank says. "Political power is highly concentrated in the presidency. International observers from the OSCE and Council of Europe have judged successive elections as deeply flawed. The authorities’ commitment to political pluralism, media freedom, the independence of civil society and the legitimacy of political opposition is uncertain."

The use of wage restrictions, price controls and directed lending continue to characterize the state’s centralized management of the Belarusian economy, the EBRD says.
In light of recent political and economic developments, while continuing its policy of constructive engagement to promote reform, the Bank will further calibrate its engagement in Belarus to limit its involvement with state-owned enterprises in the areas of trade finance and energy efficiency credit lines, the draft strategy says.

"The Bank will focus its strategic approach in the next Strategy period on those areas where it can most benefit private sector business and the Belarusian people," the EBRD says. "The Bank will continue to focus on promoting private sector development across all sectors of the economy, both directly and indirectly, with a particular emphasis on manufacturing and agribusiness. The Bank's priorities in this area will include supporting the transparent privatization of state-owned entities and assets, provided the Belarusian central state does not benefit directly from the Bank’s investments; assisting partner banks to deepen financial intermediation in underserved segments and geographic areas and improve access to finance by MSMEs [micro, small and medium enterprises]; and continuing to engage the authorities through policy dialogue to implement structural reforms that support private sector development and improve the country’s investment climate."

"To promote commercialization of the financial sector, the Bank will support the operations and growth of private and foreign-owned banks and consider supporting
non-bank financial institutions to further broaden access to finance by private sector players," the EBRD says. "The Bank will increase the proportion of onlending of trade finance to private end borrowers and reduce trade finance to state-owned enterprises."

Belarus has been a member of the European Bank for Reconstruction and Development since 1992. The Bank has participated in 42 projects in Belarus and invested an estimated €839 million in the Belarusian economy.