Finance ministers of the Commonwealth of Independent States will discuss the economic situation in the CIS member countries, including a major currency crisis in Belarus, during their meeting in the Ukrainian capital, Kiev, on Saturday.
On the same day, EurAsEC, a regional economic grouping established by some ex-Soviet republics and led by Russia, will decide on the disbursement of the first $800 million bailout tranche to Belarus as part of its $3-3.5 billion loan intended to help the eastern European country tackle its currency problems.
Belarus issue
In the first quarter of this year, the Belarusian ruble experienced pressure from a large trade deficit, generous wage increases and loans granted by the government ahead of the December 2010 presidential elections, which spurred strong demand for foreign currency.
As a result, Belarus’ central bank has devalued the ruble to 4,930 per dollar from 3,155, while the government has applied for a $1 billion loan from Russia and a $2 billion loan from EurAsEC.
If the EurAsEC’s decision is positive, Belarus is expected to receive its first bailout tranche next week. EurAsEC is planning to allocate a total of $1.24 billion to Minsk by the end of the year.
Russian Finance Minister Alexei Kudrin said in late May that EurAsEC’s aid was conditioned on privatizing $7.5 billion worth of Belarus’ property in the next three years. Belarusian President Alexander Lukashenko has rejected the condition, saying that he will not allow a “cutthroat sell-out of the country.”
On Wednesday, Belarusian Prime Minister Mikhail Myasnikovich announced that Minsk will also seek a loan of $3.5 billion to $8 billion from the IMF for three to five years. The IMF loan is expected to be half the cost of the one promised by EurAsEC, he said.
Financial cooperation initiatives
Besides the Belarus issue, the CIS finance ministers will also discuss Russia and Ukraine’s initiatives aimed at developing international cooperation in the financial sphere, the chairman of CIS executive commission, Sergei Lebedev, said on Friday.
Lebedev praised close cooperation between the CIS countries’ governments that had helped them overcome the worst period of the global economic crisis in 2008-2009.
According to the CIS statistics committee, average GDP growth among the CIS countries reached 4.5 percent in 2010, while industrial production increased by 8.7 percent and foreign trade turnover by 31 percent.
Ukraine-IMF cooperation
The talks will take place in the Ukrainian capital amid rising concerns about a slowdown in the country’s cooperation with the IMF, which may further depress its troubled economy.
In July 2010, the IMF approved a $15.15-billion standby loan for Ukraine “in support of the authorities’ economic adjustment and reform program” following a request from Kiev. Ukraine has received two tranches with a total worth of $3.4 billion, but the fund has been reluctant to allocate new tranches, citing insufficient efforts by the Ukrainian government to cut budget deficit and its unwillingness to increase gas prices and raise the retirement age.
Ukraine’s inflation rate rose to 9.4 percent from 7.7 percent in April, its highest level in six months, as prices for food, alcohol and utilities increased. According to expert estimates, the figure may rise further to 12-13 percent by mid-July.
KIEV, June 4 (RIA Novosti)