VZCZCXRO6324
PP RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHSK #0127/01 1121647
ZNR UUUUU ZZH
P R 221647Z APR 09
FM AMEMBASSY MINSK
TO RUEHC/SECSTATE WASHDC PRIORITY 0224
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHSK/AMEMBASSY MINSK 0228

UNCLAS SECTION 01 OF 02 MINSK 000127 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PGOV PINR BO
SUBJECT: BELARUS: WORLD BANK, IMF SEE NEED FOR EXCHANGE RATE 
ADJUSTMENTS, PRIVATIZATION 
 
MINSK 00000127  001.2 OF 002 
 
 
Summary 
------- 
 
¶1.  (SBU) Post has met recently with a visiting World Bank team 
and the new IMF resrep.  Their consensus view, shared by post, 
is that that resolution of the economic crisis in Belarus will 
require fundamental  steps by the GOB beyond simply obtaining 
further loans and credits.  Recognition of this at the political 
level remains an open question.  End summary. 
 
World Bank 
---------- 
 
¶2.  (SBU) World Bank Director for Ukraine, Belarus, and Moldova 
Martin Raiser briefed Charge and other diplomats April 20. 
Raiser explained that discussions with the GOB were going fairly 
well, but was careful to point out several key factors affecting 
any potential assistance to Belarus.  He confirmed that, 
following World Bank practice, structural steps -- particularly 
macroeconomic reforms -- would need to be in place prior to the 
granting of any assistance, and added that although the GOB has 
requested US$1 billion the amount which would be considered 
would be markedly less given the World Bank's $35 billion annual 
worldwide lending level.  (The GOB currently gets $100 million a 
year from the World Bank.) 
 
¶3.  (SBU) Raiser added that the issue of assistance to Belarus 
would not likely be brought to the bank's board until September 
¶2009.  He agreed with others present, including the IMF resrep, 
that Belarus' problems are comprehensive and greater than 
previously anticipated.  While he had a series of discussions 
with GOB officials, including Deputy Prime Minister Kobyakov, 
Raiser could not speak with confidence on the extent to which 
the highest levels of GOB leadership understand the depth of the 
economic crisis here. 
 
IMF 
--- 
 
¶4.  (SBU) Newly-arrived International Monetary Fund (IMF) 
Resident Representative Nataliya Kolyadina, a Russian citizen, 
met with Charge April 22.  She confirmed that the IMF team, led 
by Chris Jarvis, would return to Minsk in late April 2009 to 
review the existing $2.46 billion credit.  Kolyadina highlighted 
the fact that the GOB had made deep cuts in public expenditure 
and would probably succeed in cutting the budget deficit to 
zero, but was not meeting the necessary criteria for receiving 
the next tranche of that credit, as foreign reserves were lower 
than required.  At the same time, Kolyadina acknowledged that 
the depth of this crisis -- and, in particular, the greater 
economic declines in Russia and Ukraine -- meant that previous 
calculations were incorrect and the GOB's needs were greater. 
The IMF was still in favor of letting the Belarusian ruble slide 
farther, at least another five percent; Kolyadina expressed 
surprise at recent public statements by National Bank Governor 
Pyotr Prokopovich that the ruble would not be allowed to 
decrease more than one percent in value. 
 
¶5.  (SBU) Kolyadina confirmed that the GOB was making some 
progress in de-dollarization by raising interest rates for ruble 
savings and reducing them for hard currency accounts.  She 
agreed with Charge that currency swap arrangements (in place 
with China, and allegedly being considered by other countries 
including Russia) would not help the financial bottom line. 
When pressed, she said that the GOB had not officially asked for 
further funds from the IMF, speculating that structural progress 
such as sought by the World Bank might strengthen the case for 
additional IMF help.  From her perspective on the crisis here, 
Kolyadina feels it is inevitable that the authorities must place 
national assets on the block for privatization, sooner rather 
than later; she concurred that senior political leadership may 
not fully understand that.  (Comment: EBRD has already expressed 
willingness to help with the pre-privatization process.  End 
comment.)  She confirmed that Jarvis as team leader would be 
available to provide a briefing on the IMF mission's conclusions 
around May 11. 
 
Comment 
------- 
 
¶6.  (SBU) As we saw in the fall of 2008, there is a disconnect 
between the economic and financial experts and Belarus' most 
senior political leadership.  GOB concern for the views of the 
populace, not usually of much importance here to regime 
officials, grew prior to the IMF-mandated 20% devaluation of the 
Belarusian ruble in January 2009 and has increased since. 
Politically, the authorities are not prepared to force another 
precipitous devaluation, and are wary that too much of a 
downward shift over time in the ruble rate will spark broader 
complaints.  Separately, the privatization of key cash cows -- 
 
MINSK 00000127  002.2 OF 002 
 
 
those few state-owned institutions, particularly in the energy 
sector, that generate much of the nation's income -- is a step 
which the Presidential Administration and even some of the 
nationalists in the democratic opposition are hoping can be 
avoided.  Currency swaps and grand statements by the regime's 
allies will be hailed from time to time but will not add to 
dwindling reserves.  As recognition sets in that there are no 
other options for sustaining the economy -- a message that will 
be underlined by the IMF team later this month, and will be 
further confirmed by the fact that any World Bank assistance 
will be neither extensive nor imminent -- the GOB will have to 
choose between economic realities and political fantasies. 
MOORE