Belarus: Lack Of Democratic Reform Threatens Loan Prospects :: Charter'97 :: News

The European Bank for Reconstruction and Development is drafting a new
strategy for its role in Belarus. The move follows an earlier threat to cut
back financing unless Minsk improves its record on democratic reforms.
RFE/RL`s Ron Synovitz takes a closer look at how the bank is reacting to the conduct of President Alyaksandr Lukashenka`s regime during elections in
September.

Prague, 7 November 2001 (RFE/RL) -- Concerns over the failure of Belarusian

authorities to respect basic democratic standards during last September`s

presidential elections has led the board of directors for the European Bank

for Reconstruction and Development (EBRD) to order a new strategy on

operations within the country.

The EBRD is not expected to halt all of its lending and investment in

Belarus. But several officials at the bank`s London headquarters told RFE/RL

privately this week that the conclusions of election monitors from the

Organization for Security and Cooperation in Europe (OSCE) mean that a

freeze on financing for public sector projects is likely to be incorporated

into the strategy.

The call for a new strategy follows a warning issued last April in a letter

from EBRD President Jean Lemierre to Belarus`s President Alyaksandr

Lukashenka. Lemierre warned Lukashenka that an effective freeze on

public-sector projects in Belarus would remain in effect unless notable

progress was made toward democracy in the September elections.

Lemierre told RFE/RL at the time that continued delays from Minsk would lead

the EBRD to either cut back its activities in Belarus or even cancel the

country`s membership in the institution altogether.

The EBRD board of governors also expressed grave concern about the conduct

of last year`s parliamentary elections in Belarus -- including reports of

harassment of opposition candidates and measures that hampered election

monitors.

Last week, OSCE monitors released their final report on the September

elections. The report included three key conclusions for consideration by

international institutions.

First, the monitors said the campaign and balloting had failed to meet the

OSCE`s basic standards for democratic ballots.

Secondly, the report acknowledged that a pluralistic civil society is

emerging in Belarus, which could serve as the foundation for developing a

democratic political structure that represents all segments of the

population.

Finally, the OSCE said the isolation of Belarus is not in the best interests

of the people there and will not help strengthen democratic development.

EBRD Secretary-General Antonio Maria Costa told RFE/RL yesterday that it is

still too early to discuss details of the new Belarus strategy because the

plan is still being drawn up. But he indicated the OSCE`s recommendation

against the isolation of Belarus is important.

"We are obviously very familiar with the three points which were raised in

the OSCE document. It`s premature for us to pass any view on any of these

three points -- especially on the third one. But indeed, it is one of the

considerations which will be kept in mind at the time of drafting [the new

country strategy for Belarus] and, above all, at the time of the board

discussion."

Costa noted that Article One of the EBRD`s founding charter means that the

EBRD places more emphasis on democratic reform in recipient countries than

other international financial institutions, like the International Monetary

Fund or the World Bank.

"Certainly, what I would like to stress is the importance we attribute at

the bank to Article One, which is indeed a distinctive feature of our

mandate in respect to other institutions. We can only operate in countries

which progress in the realization of [democratic] and [market] economic

[reforms]. That will be the key first consideration to be made before any

other operational considerations can be put forward in the strategy."

Costa explained that before any draft strategy on a country reaches the

board of directors for a final decision, it is usually examined by board

members in an informal "workshop" environment where views are exchanged and

an initial assessment is passed. He said that step would be taken during the next three weeks and that final approval of the strategy is likely during

December.

"During the month of November, [the board will review the draft of the

strategy] probably only [in an informal] workshop. And we do not know what

kind of revisions the document will itself require following directors`

comments. Therefore, we are talking about a possible board consideration [of a final strategy] sometime in December."

It would be an unprecedented step for the EBRD to cancel the membership of

Belarus. Turkmenistan is the only other EBRD member that has seen financing

frozen for disciplinary reasons linked to failed democratic reforms.

That move followed repeated warnings from the bank and culminated when

Turkmenistan`s President Saparmurat Niyazov refused to meet with a group of

senior EBRD officials who had flown into the country specifically to see

him.

The IMF halted lending to Belarus in 1995 due to the Lukashenka government`s

continued rejection of recommended economic reforms.

Cooperation between Minsk and the IMF resumed this year in March with a

six-month IMF "staff-monitored program." That program did not include any

lending but served as a test of the government`s ability to meet its

declared policy targets.

But the IMF announced yesterday that the government had only partially

completed the program. A senior IMF official, John Odling-Smee, said in

Minsk yesterday that it is too early to discuss the possibility of resuming

IMF loans to Belarus.

The World Bank also is drafting a "country assistance strategy" for Belarus

that could result in loans of up to $260 million during the next three

years.

World Bank policy is to make lending decisions based on economic criteria.

But its draft program includes health and environmental projects that would

rely on co-funding from governments and other donors. That co-financing also

could be threatened by concerns over the lack of progress on democratic

reforms from Minsk.