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Belarus: Are Economic Reforms On the Horizon?

  • Robert Lyle



Washington, 26 June 1997 (RFE/RL) - In a move that would seem completely out of character with recent actions, the government of Belarus has signed a memorandum of understanding with the World Bank promising to undertake a list of economic reforms.

A summary of the memorandum released by the bank says Minsk committed to carry out such reforms as ending price controls, reducing currency and foreign exchange controls, cutting state subsidies to enterprises, moving to privatize small enterprises, reform taxation, and set up the legal structure for rights of land use and private property within 12 to 18 months.

Belarus also agreed to accelerate the "speed of transition to an efficient market economy" and to create a "favorable climate to attract national and foreign investment."

If Belarus carries out the agreed reforms, the bank promises to lend the country up to $100 million a year. If the government works out a program with the International Monetary Fund (IMF), as well, the bank agreed to raise that lending to $200 million.

The bank says this is the "first document of such a comprehensive nature ever put together by the government and the bank."

What makes it seem so strange is that the memorandum was released just a day after the bank's resident representative in Minsk, Christopher Willoughby told a press conference there that Belarus continues to back away from reforms and is increasing state interference in the economy.

Willoughby said the main obstacle to reform is on the political level and that economic restructuring has been in reverse since late 1995 when the bank and the IMF suspended their lending activities.

He told reporters the country seemed to "fear" reforms, even afraid to follow Russia's example in such things as privatization.

The country's main resource is a skilled and educated work force, he said, but they must be free to be productive. Instead, he said, Minsk is strengthening its interference in economic mechanisms.

Willoughby, who is moving the bank's office from Minsk to Kyiv, Ukraine in a bank consolidation, was not available to discuss the memorandum Wednesday, but senior bank officials in Washington who have been dealing with Belarus say the public perception is quite different from what officials are telling them.

The officials asked not to be identified, but they told our economics correspondent that the memorandum grew from an in-depth study the bank did last year of the Belarus economy. After studying the report, the officials say, Belarus returned it with 20 to 30 pages of commentary which said basically, "we agree, and here's what we'd like to do about it."

One bank official said he had never seen such a lengthy and in-depth response to such a report. After further discussions, the bank and Belarus officials decided to turn it into a plan of action by drafting a memorandum of understanding -- reflecting the views of both sides. It was signed in Minsk a few days ago.

The officials say there is no denying that the economic situation in Belarus is "difficult" and that no one should pretend the country is about to turn a corner. President Aleksandr Lukashenka repeats publicly and privately that he is only for very slow reforms at his pace.

But the bank officials say a number of ministers and officials in the Belarus government are now saying: "we tried it our way and it didn't work -- it didn't get the result we wanted, so we want to try the market oriented approach the bank has been advocating."

The bank officials say they are not being naive. "Sure there will be disappointments," said one. "But if the government is willing to commit itself publicly -- and Lukashenka signed off on this memorandum as well as the prime minister and the minister of economy -- we can support them."

The bank says in the memorandum that if Belarus follows through on its reforms, it will provide technical help and loans for critical areas of the social safety net, energy conservation in schools and hospitals, fixing municipal water supplies, improving public health, and housing reform. In these areas alone, says the bank, it would be ready to make one or two loans every year of $25 million.

As soon as Belarus creates the environment conducive to private enterprise development, the bank says it is ready to help. Similarly, loans for electric power development, oil industry improvements, export oriented private businesses, demonopolitization and privatization of major industries like construction, transportation, agriculture and central heating could be undertaken.

The IMF, which suspended a stand-by loan of around $270 million after Belarus had drawn only around $70 million, says it has no programs in its pipeline nor plans to resume lending. However, IMF sources say, fund relations with Belarus "are good" and in fact a mission of IMF experts and officials has just returned from conducting the regular yearly consultations with Minsk.
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