EDB extends the third tranche of the EFSD credit to Belarus
Moscow, 27 April 2017. The Republic of Belarus received the third, US $300 million tranche of the financial credit from the Eurasian Fund for Stabilisation and Development (EFSD) managed by Eurasian Development Bank (EDB). Out of the total of US $2 billion to support the Belarusian reform programme in 2016-2017, the country has already disbursed US $1.1 billion (including the previous tranches).
The third tranche was extended after Belarus had complied with the condition precedent set by the Fund’s Council that required that the programme supported by the EFSD financial credit be strengthened with measures aimed at improving management of state-owned enterprises. The programme needed to be modified because of Belarus’ failure to achieve three indicative targets, including the adoption of a strategy to improve management of state-owned institutions and two presidential decrees, on additional measures to extend social support to some categories of the unemployed, and on approving the procedure for arranging trust management of financially unstable enterprises. The common objective of these documents is to promote reforms in the public sector in order to improve management of state-owned assets and mitigate the social effects of these reforms.
The proposed modifications are described in the revised Letter of Intent from the Government and National Bank of Belarus, which states that the conditions for the provision of the fifth through seventh tranches included measures aimed at improving corporate governance at 17 joint stock companies. These include the adoption of corporate codes, the creation of respective committees and the inclusion of independent directors in supervisory boards, the optimisation of state-owned assets at the national level by transferring at least 45 state-owned enterprises into community ownership, as well as the sale of government shares in some joint stock companies via the exchange.
The conditions for the sixth tranche include a new control indicator requiring that social protection mechanisms be devised and made effective in order to provide retraining for employees who will be dismissed as a result of reorganisation and ensure their employment in the future. This is expected to ensure greater optimisation of the staff at state-owned enterprises and is deemed as a compensation measure for the third tranche condition that envisioned an increase in unemployment benefits to the minimum subsistence level but was not complied with.
The seventh tranche includes a repeated requirement that local authorities approve the procedure for transferring public utility enterprises into trusts as an additional measure for the rehabilitation of financially unstable state-owned enterprises, primarily in agriculture. This condition now has the status of a control indicator.
The Fund’s Council exempted Belarus of compliance with the control indicator that restricted unrelated government borrowings to 75% of the amount necessary for repayments or required that, if this threshold is exceeded, surplus borrowings be used exclusively to increase gross international reserves. In January-August 2016, Belarus’ government borrowings totalled 103.4% of the amounts to be repaid. The exemption was provided as a result of the fact that the country’s consolidated budget over this period had a significant surplus, which made it possible to increase budget deposits by an equivalent of US $582 million. This suggests that the government has technical possibilities to increase foreign currency reserves to the required level if all the funds are converted into the reserve currency.
The Fund’s Council requested EDB, as the Resources Manager, to arrange consultations with the Belarusian authorities in May in order to negotiate additional measures for subsequent tranches so as to achieve the objectives of the programme supported by the EFSD financial credit. The negotiations will focus on developing mechanisms to improve management of state-owned enterprises as a key factor conducive to long-term sustainable growth in 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.
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.
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