Belarusian Economic Research and Outreach Center
 Dzmitry Kruk, Kiryl Haiduk

FREE Policy Brief: Directed Lending: Is It An Efficient Tool to Modernize the Economy?

Over the last couple of years, the growth rate of potential Belarus’ GDP declined. The government intends to revive economic growth by the policy of ‘modernization’, in practice pinned down to a drastic increase in the volume of capital investment, including by the means of directed lending. As the pre-crisis macroeconomic imbalances are at least partially cured, the government seems to be eager to apply a familiar policy tool. However, the empirical analysis of the effects of directed lending on total factor productivity and economic growth casts serious doubts on the efficiency of this policy tool.