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Belarus: World Bank Won't Give Up In Minsk

Washington, 13 July 1998 (RFE/RL) -- The World Bank's country director for Belarus describes the bank's further reduction of its staff in Minsk as only "retrenching half a step."

Paul Siegelbaum says the bank will still be in Belarus, offering the same advise to privatize and liberalize, and ready to help whenever the government in Minsk begins to listen.

What the bank is not offering is money. Like its sister institution, the International Monetary Fund (IMF), the World Bank stopped all loans and credits to Belarus in 1995 as President Aleksandr Lukashenka veered from the road to market reforms and began returning the country back toward central planning.

Gradually since then, both the fund and the bank have been reducing the size of their staff in Belarus and last week the bank's last acting resident representative, economist David Phillips, announced he would be leaving in August.

When agreements with the government are not fulfilled, Phillips told Reuter's news agency in Minsk, "We have to abandon Belarus."

In an interview with our economics correspondent in Washington, country director for Ukraine and Belarus Siegelbaum said he wouldn't use the phrase "abandon Belarus."

The Minsk office will remain open, manned by local staff members, but managed from Kyiv beginning in August.

"We actually expect in some ways this will intensify the dialogue with the government on policy matters," says Siegelbaum. "The core of our strategy is to continue to be there under all circumstances with the same message -- a consistent message of what they have to do until they hear us."

That message will mostly come from the more senior bank officials in the Ukrainian capital for the next year, says Siegelbaum, "encouraging them to take some key liberalization measures involving the exchange rate and prices and government inspired credits."

He admits that the Lukashenka government isn't listening to that advice right now. But he says he believes there is a "gradual process" underway where the realization is beginning to be understood at least in the lower levels of government "that the present situation is not sustainable."

The Lukashenka government has achieved some "impressive economic results" over the past two years, says Siegelbaum, but it has been at the cost of de-capitalizing Belarus' industry and creating "a great many distortions" which are showing up in the country's exchange rate situation -- a situation he calls "crazy."

Only last week, the Belarus central bank imposed further restrictions on foreign exchange trading in an attempt to prop up the Belarusian ruble. Currency traders in the country said the move effectively closed the interbank market for currency.

The World Bank official says other economic and financial decisions taken by the government are costing the country dearly. "On the one hand, they subsidize agriculture, then impose price controls on agricultural products. So those products are sold in Russia instead of Belarus (and) the Belarusians are now subsidizing the price of food that's sold to the Russians."

On the other hand, he says, the situation is sustainable in the sense that Russia continues to assist Belarus. "As long as they can count on Russia as their de facto financier, it's hard to predict when this will come to an end."

However, Siegelbaum says that sooner or later the Belarus government will realize "that they've really got to have a fundamental rethinking of this economic strategy."

Until then, says Siegelbaum, "I'm going to be there with the same message -- you've got to privatize, you've got to liberalize -- and I'm going to keep telling them the same thing until they listen."