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Almaty, 19 December 2013. Sergey Shatalov, Deputy Chairman of the Management Board at Eurasian Development Bank (EDB), is taking part in the G20 Seoul Conference. One of the central issues on the forum’s agenda is the strengthening of dialogue and cooperation between Regional Financial Arrangements (RFAs) and between RFAs and the IMF.

 

RFAs, also called “safety nets,” are intended to support the balances of payments and budgets of the member states and to help overcome the consequences of the crisis and to reform their economies in order to improve their sustainability. For this reason, the discussion of their role in the global financial architecture is of special interest to EDB, which is also acting as the Resources Manager of the EurAsEC Anti-Cricis Fund (ACF), one of these institutions.

At the conference Sergey Shatalov said, in particular, that economic unions should coordinate the economic policies of their member states using RFAs. He believes that RFAs should deal with crises caused not only by external shocks but by internal economic disproportions as well.

“If all member states of an economic union pursue a responsible macroeconomic policy and coordinate it effectively, the union has better prospects,” said he. “To this end an economic union should use its safety net and other tools to maintain a sustainable macroeconomic policy and to combine financial support and necessity in order to provide effective assistance to its member states in eliminating macroeconomic imbalances.”

Sergey Shatalov believes that the lack of effective instruments for the adjustment of macroeconomic policies makes economic unions weaker.

“Economic unions have the aim to increase revenues and speed up economic growth by ensuring the free movement of goods, services, labour and capital within the union and converging revenues of its member states. A sustainable and coordinated macroeconomic policy makes it possible to achieve these goals and ensures an effective distribution of production factors in and between the countries. Weak coordination and consistent imbalances induce scepticism about the prospects of the union and undermine integration processes,” said he. “If a country pursues an non-sustainable economic policy, this will worsen investors’ perception of the risks associated with other countries of the union as well. In the unions, which have their own RFAs, macroeconomic imbalances in a country are a burden for the budgets of its partners. Economic unions should help their member states to remedy, not simply finance, economic imbalances.”

“Economic information needs to be collected and shared and recommendations need to be developed as to how make economic policies sustainable irrespective of whether a country in crisis receives loans or not,” emphasised Sergey Shatalov. “In addition, there should be a practice of imposing sanctions if requirements are not met. For investors, a possibility to supervise the economic policy is a guarantee that the quality of the country’s economic policy is high. Those countries that agree with supervisory practices can attract more foreign direct investments.”

See the ACF presentation here.

Additional Information

Eurasian Development Bank is an international financial institution founded by Russia and Kazakhstan in January 2006 with the mission to facilitate the development of market economies, sustainable economic growth and the expansion of mutual trade and other economic ties in its member states. EDB’s charter capital exceeds US $1.5 billion. The member states of the Bank are the Republic of Armenia, the Republic of Belarus, the Republic of Kazakhstan, the Kyrgyz Republic, the Russian Federation, and the Republic of Tajikistan. Read more at http://www.eabr.org/.

The EurAsEC Anti-Crisis Fund (ACF) amounting to US $8.513 billion was formed on 9 June 2009 by the governments of six countries: Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia, and Tajikistan. The objectives of the ACF are to assist the member countries in overcoming the consequences of the global financial crisis, ensure their economic and financial stability, and foster integration processes in the region. The ACF member countries signed the Management Agreement with Eurasian Development Bank giving EDB the role of the ACF Resources Manager. Read more at http://acf.eabr.org/.