Economic Reforms Are Inevitable And Painful, World Bank’s Manager For Belarus

We have always believed and are still convinced that the economic future of Belarus depends on whether structural economic reforms will be carried out. Our message remains unchanged: today, structural reforms are even more important and relevant than it was in the past. The Belarusian economic model the country chose around 2003 is currently under severe stress. Belarus has consumed more than it has produced for a long time and thereby making significant progress in terms of improving the living standards of people. There are not so many ways to close the gap. The country is like a family. If you consume more than you earn, this is due to the depletion of your own savings and reserves, external borrowing or help from other countries. The ability to use all these options has recently been declining. The state of balance leaves much to be desired: household savings are running out, and it is more difficult for the country to borrow from its traditional lenders. As a result, the country has to live within its means: it cannot afford the previous level of state support for agricultural enterprises, subsidizing heating services for the population. The need for structural transformations became much more acute in 2017 when foreign debt reached 130% of exports than in 2003 when it was only 30%. The Roadmap is a process of in-depth technical discussions and consultations of the World Bank and the authorities in 2016–2017, and then in 2018–2019. The roadmap includes five chapters. The first and most important is the real economy. We focus on the situation with state-owned enterprises and competition policy. State-owned enterprises use national capital less effectively than private ones. They create a debt burden that increases the need for borrowing, including external borrowing. Economic growth is impossible without the effective use of capital. If Belarus continues to borrow outside the country in order to support its state-owned enterprises, its position will remain very fragile. The World Bank does not insist on large-scale privatization. Some businesses will work better if they become private. Others may well remain state-owned, be restructured and made subject to market discipline. Some businesses will have to be closed down. Another chapter of the roadmap is social protection. Belarus needs a broad and effective unemployment protection program. Expenditures on unemployment benefits in Belarus amount to 0.006% of GDP. The cost of targeted social assistanc...