You are here

Mikhail Kovalev, professor of Belarusian State University on IMF loan for Belarus and role of China in economy

Belarus has had a successful cooperation with the IMF for many years. In 2010, we received a large loan worth 3.5 billion dollars in the framework of the Standby Program. Belarus has already paid its debt. Now, there are discussions about a new loan from the IMF with very good interest. However, should Belarus count so much on the IMF? We asked the opinion of professor Mikhail Kovalev.

We hope to get a loan worth 3 billion dollars for 10 years with the interest rate of 2.3% a year. What does it mean?

Mikhail Kovalev, professor of the Belarusian State University:
Thus, we will increase our foreign-exchange reserves from 5 billion dollars up to 8 billons. The National Bank will be more stable, will keep the exchange rate of the Belarusian ruble and will be able to reduce the cost of money. It will give impetus to residential construction. People will be borrowing money and the situation of enterprises will get better.

However, it’s not a magic wand. What stands behind all that?

Mikhail Kovalev, professor of the Belarusian State University:
When giving a loan, the IMF makes very strict conditions, making sure that the money will be paid back.

In this case, people should pay 100% of costs for housing and utility services and transportation.

Mikhail Kovalev, professor of the Belarusian State University:
This is one of the conditions.

As I understand, that should happen at once.

Mikhail Kovalev, professor of the Belarusian State University:
Yes. That’s the main problem that is under discussion at the moment. I think the IMF will make a compromise. The IMF understands that we can’t do it at once, and also there’s no proof that the economic situation will improve if we do so.

We can remember Yugoslavia. The interference of the IMF had critical consequences in the 1980s.

Mikhail Kovalev, professor of the Belarusian State University:
We have another example of Ukraine. Ukraine does everything like the IMF is telling it to do. However, we see the situation there. The level of life in Ukraine is three times worse than in Belarus.

Can we find a compromise? Maybe we shouldn’t get involved in this.

Mikhail Kovalev, professor of the Belarusian State University:
I’m the supporter of this loan. I guess the President wants to take the loan as well. However, Belarus is negotiating with the IMF. There hasn’t been one country that immediately agreed to the terms of the IMF.

Is the voting based on financial and economic facts? About 18% of the votes belongs to the USA.

Mikhail Kovalev, professor of the Belarusian State University:
The IMF and the Word Bank is controlled mostly by the USA. However, the heads of the organizations are changing. For instance, the World Bank is run by an American, and the IMF is run by a European. China is becoming more influential as well.

Last week, the Chinese Yuan became the fifth currency in the basket of the IMF.

Mikhail Kovalev, professor of the Belarusian State University:
It was obvious. The majority of countries were able to trade using the Chinese currency or their national currencies with the help of China. That’s why it would be strange if the IMF didn’t admit it.

Could Belarus benefit from that taking into account the level of cooperation with China?

Mikhail Kovalev, professor of the Belarusian State University:
Belarus is one of the first countries that realized the future role of China in the world. Now Belarus is among its main partners.  

Mikhail Kovalev, professor of Belarusian State University on IMF loan for Belarus and role of China in economy