OREANDA-NEWS. June 25, 2009. Savings of individuals in Belarus are protected against inflation by changes of interest rates for deposits. The statement was made by Belarusian Finance Minister Andrei Kharkovets as he presented a bill before parliamentarians on June 24. The bill provides for amending the laws “Indexation of population revenues taking into account inflation”, “Guaranteed recovery of bank deposits of individuals”, “Economic insolvency (bankruptcy)”.

The bill is designed to disable indexing individuals’ savings because there is another mechanism in place to protect individuals’ savings against inflation, said Andrei Kharkovets. “The mechanism is implemented by banks via changing interest rates for deposits,” he explained. At present interest rates for bank deposits are also dependant on the refinancing rate of the National Bank. The refinancing rate is constantly adjusted to take into account the inflation level. Thus, the interest rates already provide for recovering inflation-caused losses of individuals’ deposits. As the law on indexing population revenues taking into account inflation is not used in practice, the new bill addresses contradictions and gaps unearthed by the law enforcement practice. The changes will in no way worsen the existing status of depositors.

Besides, the new bill empowers the Agency for guaranteed recovery of bank deposits of individuals to temporarily run a bank to prevent its bankruptcy and also enables the Agency to act as the anticrisis manager in a bank bankruptcy procedure. Vice Chairman of the Board of the National Bank of the Republic of Belarus (NBRB) Nikolai Luzgin underscored, these functions used to be performed by the National Bank although the practice contradicts international norms and the need for anticrisis management of Belarusian banks emerged sporadically. The relevant norms will be introduced into the law “Economic insolvency (bankruptcy)”.

Belarus has appealed to the European Union requesting financial aid, said Andrei Kharkovets. “We have sent a relevant request and are awaiting a response. I think these matters will be considered in the near future,” noted the Minister. In his words, Belarus expects to receive preliminary consideration results in roughly ten days.

“We have not requested specific sums. We know that the European Union has a mechanism of macroeconomic financing. It is related to the IMF operation in the countries that request such aid. Therefore, in order to use a comprehensive approach towards financing issues, we have explored this possibility, too,” stressed the Minister. Andrei Kharkovets explained: “Sums will be considered in view of the financing shortage. Support as large as two thirds of the sum can be provided”.

Belarus will resume the negotiations with Russia on allocating another tranche of the Russian loan after the country receives an official approval of the first review of Belarus’ Stand-By Arrangement from the IMF Board of Directors. “We do not discuss the issue with our Russian colleagues as there is no final IMF position. We will wait for the IMF decision which is to confirm the appropriateness of the Belarusian economic policy. This is what we can operate with during the negotiations with Russia,” the Minister said.

Andrei Kharkovets reminded that the Russian side had earlier expressed its wish to see the results of the IMF review of the Stand-By Arrangement for Belarus.

Belarus and Russia signed an agreement, which provides for granting a USD 2 billion stabilisation loan to Belarus in 2008-2009. The first USD 1 billion tranche of the loan was transferred to the National Bank of Belarus on November 18, 2008. The second USD 500 million one was received in March 2009.

The International Monetary Fund is going to grant the second tranche of USD 675 million to Belarus. Besides, the IMF is ready to increase the total amount of the loan by USD 1 billion, from USD 2.46 billion to USD 3.46 billion.

A session of the IMF Board of Directors is to be held in late June to discuss increasing the financial support for Belarus by USD 1 billion, Nikolai Luzgin said.

According to him, the initial date of the session is June 29. “We hope the IMF Board of Directors will make a positive decision because Belarus honours all obligations,” he stressed.

The agreement to allocate a standby loan to Belarus as large as 1.62 billion SDR (around USD 2.46 billion) within 15 months was approved on January 12, 2009. If the IMF Executive Board approves the loan sum increase, the sum will be raised to 587.4% of Belarus’ quota.