Belarus Is on the Verge of a Large-Scale Financial Crisis, Kavalkin Says

This year overdue debts have almost doubled.

Belarus establishes Assets Management Agency. Aliaksandr Lukashenka has signed a corresponding decree.

The dictator's press-service informs that the decree allows transferring bad debts for loans of sustainably insolvent agricultural organizations to OAO Assets Management Agency.

The Agency is empowered to provide deferral and installment of payment on loans transferred to it.

Experts of the IMF have also paid attention to such enterprises. Peter Dolman, head of the IMF mission in Belarus, told that toxic assets were one of issues that would be under discussion of mission's experts and an official Minsk.

Zautra Tvaye Krainy asks experts whether the Agency is able to save the Belarusian agriculture.

According to Uladzimir Kavalkin, head of the Kosht Urada project, in the near future the Agency will be required not only by the agricultural sector, but construction and industry sphere.

- This year overdue debts have almost doubled. It is urgent not only for bank loans, but accounts payable and receivable. That is, enterprises should pay money to each other and no one does it, the expert notes. - The economic situation is difficult enough, I would say it is critical.

According to the economist, the government is facing a difficult choice: to bankrupt loss-making enterprises, otherwise the rest of the economy tied to these bankrupt enterprises stops.

- Now there 30% of public enterprises are unprofitable. The number of companies which margin makes up 0-5% (which can turn into unprofitable at any moment) is about 50% of the remained 70%. It turns out 60% of the economy are either low-margin which are about to be bankrupts or already loss-making enterprises, the expert summed up.

If in the next two months the government does not resolves the situation, Belarus can face a large-scale financial crisis, Uladzimir Kavalkin predicts.

Why is the established Agency focused primarily on agribusiness issues?

- The situation in the agricultural sector is, perhaps, the most urgent now. Problems and debts accumulated there longer than two past years, the economist says.

According to him, the effectiveness of the future agency depends on the scope of its authority.

- The thing is what functions it will perform. Will it be able to engage in bailout and bankruptcy of troubled enterprises? Will there be the political will to bankrupt the loss-making enterprises? Will the Agency be allowed to act in accordance with this political will? If it is allowed it is possible that this structure will be fruitful, Uladzimir Kavalkin predicts.

- Things are done very slowly in Belarus. I filed the note about the need of such agency to the Minister of Finance in 1997. And finally it is done. But the client is rather dead than alive, and all these measures might be useless, independent economist Mikhail Zalesski says.

According to the expert, debts of Belarusian agricultural enterprises to their creditors are ten time higher than those who owed money to them.

- In theory, the Agency shall transfer loss-making enterprises to those who are able to make a silk purse of them. But nothing has been done in this direction since 1991, the expert assures.

According to him, there are tens of thousands of people who are able to effectively manage these enterprises, their property. But there is no legislative procedure, market mechanisms which would allow doing it.

- The house begins from its foundation. And if we mean the agriculture, the private land ownership is the foundation. Those who produce agricultural products do it at their own risk, and, finally, they should have a right to completely manage the results of their labour. This is not practiced here. As well as mortgage banks related to land ownership, the lease system, the staff training system, and the general concept of agricultural enterprises, he says.

Why then is the Agency established?

- The only purpose is to carry out scheduled activities according to established procedure. Nothing personal, it is just business. Bureaucrats are entitled to carry out such measures which improve our image in the eye of the World Bank and they "ticked", Mikhail Zalesski believes.