EFSD approves $2-billion loan for Belarus

The board of the Eurasian Fund for Stabilization and Development (EFSD) has approved a loan of $2 billion for Belarus.

According to the press office of the finance ministry, the loan will be used for supporting the government’s and the National Bank’s economic policy measures and structural reforms in the period between 2016 and 2018.

The loan will be provided in seven installments. Each of the installments will have to be repaid within 10 years and will carry low interest rates for the first five years.

The first tranche of $500 million is expected to be transferred to Belarus in the next few days, the press office noted.

According to the EFSD website, the other six tranches will be provided after Belarus has completed certain conditions. In particular, there are plans to provide two tranches in 2016, three tranches in 2017 and one tranche in 2018.

Taras Nadolny, first deputy head of the National Bank, told reporters earlier this month that Belarus expected to receive a loan of about $1.1 billion from the EFSD.

Belarus formally requested financial assistance from the EFSD in March 2015. The government initially wanted to borrow $3 billion from the Russian-controlled fund, but the requested amount was later reduced to $2 billion. The EFSD board delayed a decision on the loan request for months, warning that Minsk had to display its commitment to economic reform.

While speaking to reporters in Minsk in February, Aleksandr Surikov, the Russian ambassador to Belarus, said that Russia had approved the loan, and that it would take «days to make a loan agreement, and then the funds will be channeled into Belarus’ economy.»

According to unofficial sources, Belarus is required to limit pay increases in 2016 and 2017 as a condition for receiving a new loan from the EFSD.

The government’s spending on wages and salaries is not allowed to increase by a larger margin that the projected inflation rates in 2016 and 2017, namely, 12 and nine percent.

In addition, Belarus is required to ensure that households cover 50 percent of the costs of utilities in 2016, up from 30 percent in 2015. The share of the utility costs covered by households has to increase to 70 percent in 2017.

The cost recovery rate for transport services is expected to rise from 60 percent in 2015 to 65 percent in 2016 and to 70 percent in 2017.

Belarus has also to liberalize the prices of telecommunications and postal services, which are currently regulated by the government.

In 2016, Belarus reportedly has to repay a total of about $1,150 million to the Russian government and the EFSD.