Journal Issue

IMF Executive Board Concludes 2012 Article IV Consultation and the Second Post-Program Monitoring Discussions with Belarus

International Monetary Fund
Published Date:
May 2012
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The last year was marked by a severe balance of payments crisis. Unsustainable policies in late 2010 and the first quarter of 2011 pushed the economy into an inflation-depreciation spiral, with the 12-month inflation rate accelerating to 109 percent. Despite the slowdown of economic activity in the second half of 2011, growth remained robust at 5.3 percent.

Since mid-2011 the authorities have been implementing stabilization measures. The NBRB has discontinued the practice of providing liquidity at non-market terms in June 2011 and gradually increased policy interest rates in the second half of the year. The authorities unified the exchange rate and introduced a flexible exchange rate regime in October 2011. The general government fiscal balance showed a surplus of 3 percent of GDP for the year. These policies have restored foreign exchange markets, reduced inflation (which has fallen to below 2 percent per month in the first quarter of 2012) and improved the current account deficit. Recently signed oil and gas agreements with Russia have led to a significant improvement in terms of trade. Official reserves have risen to a level covering 2 months of imports of goods and services following substantial privatization proceeds, two tranches of a EurAsEC Anti-Crisis Fund loan and a loan from Sberbank.

The financial system has weathered the 2011 crisis and banks’ capital has been replenished with general budget resources. In 2011, bank recapitalization expenditure amounted to 5 percent of GDP. System-wide non-performing loans increased modestly to slightly over 4 percent at the end of 2011, but are expected to increase further as the economy slows down. Continued deterioration in asset quality would put pressure on banks’ capital and could call for new recapitalizations.

The authorities have announced their intention to reduce inflation and lower the current account deficit and to raise the level of reserves and adjusted policy plans by curtailing plans for lending under government programs and adopting a balanced budget for 2012. However, they also announced a 5-5.5 percent GDP growth target and stated their intent to increase dollar wages significantly.

Structural reforms have been slow, with occasional reversals. Banking sector reform has been progressing slowly, and little has been done to harden SOE’s budget constraints. Price liberalization was partially reversed in 2011.

Executive Board Assessment

The Directors agreed with the thrust of the staff appraisal. They welcomed the Belarusian economy’s emergence from the 2011 crisis owing to the authorities’ commendable adjustment policies in the second half of the year, including exchange rate unification, introduction of a flexible exchange rate, monetary policy tightening, and expenditure and wage restraint. These policies have restored foreign exchange markets, reduced inflation and the current account deficit, and helped increase reserves. Given substantial remaining vulnerabilities and risks, Directors strongly encouraged the authorities to remain firmly focused on consolidating domestic and external stability and to pursue structural reforms.

Directors stressed the importance of ensuring consistency between the authorities’ policy goals. They noted that pursuing high growth and wage targets could re-ignite the inflation-depreciation spiral and imperil medium-term fiscal and debt sustainability. They called for continued fiscal restraint and for a disciplined wage policy in the public sector, including SOEs. Keeping a tight monetary policy stance would also be important to keep inflation in check. It should be supported by continued exchange rate flexibility and a strong reserve buffer to insulate the economy from external shocks. In this connection, progress toward implementing the prerequisites for inflation targeting would boost the credibility of monetary and exchange rate policies.

Directors emphasized the need to enhance fiscal discipline, noting that limiting quasi-fiscal operations and rationalizing government spending would improve efficiency and reduce the debt level over the medium term. They encouraged the authorities to accelerate plans to reduce general subsidies and improve targeted social assistance and implement civil service and pension reforms.

Directors underscored the need for strong and carefully sequenced structural reforms to improve productivity and growth prospects and reduce vulnerabilities over the medium term. They highlighted the importance of reducing the government’s direct control of the economy, noting that price liberalization, enterprise reform, and privatization would improve resource allocation and strengthen market incentives. In the financial sector, a greater role for private banks would increase efficiency. Relieving state-owned banks of the obligation to undertake directed lending once the Development Bank becomes fully operational, while ensuring that the bank is run on prudent and transparent principles, would be important. Directors also called for further improvements to the business and investment climate.

Directors noted the authorities’ interest in a Fund-supported arrangement. They stressed that a firm commitment by policymakers at the highest level to a strong and consistent stabilization and reform strategy would be essential.

Public Information Notices (PINs) form part of the IMF’s efforts to promote transparency of the IMF’s views and analysis of economic developments and policies. With the consent of the country (or countries) concerned, PINs are issued after Executive Board discussions of Article IV consultations with member countries, of its surveillance of developments at the regional level, of post-program monitoring, and of ex post assessments of member countries with longer-term program engagements. PINs are also issued after Executive Board discussions of general policy matters, unless otherwise decided by the Executive Board in a particular case.

Table 1.Belarus: Selected Economic Indicators, 2008–12


National accounts
Real GDP10.
Total domestic demand17.8-
Of which: fixed23.85.017.511.11.5
Net exports 1/-9.21.3-3.73.8-0.3
Consumer prices
End of period13.310.19.9108.738.4
Monetary accounts
Rubel broad money22.50.927.464.142.8
Growth of credit to the economy at constant exchange rates39.017.623.729.242.7
External debt and balance of payments
Current account-8.2-12.6-15.0-10.5-6.2
Trade balance-10.3-14.1-16.4-6.7-1.9
Exports of goods54.043.446.075.179.6
Imports of goods-64.3-57.5-62.4-81.8-81.5
Gross external debt25.045.651.161.460.4
Public 2/6.818.921.627.825.1
Private (mostly state-owned-enterprises)18.126.729.533.635.2
Savings and investment
Gross domestic investment37.637.341.236.334.9
National saving29.424.726.225.828.7
Public sector finance
General government balance1.3-0.7-
Augmented general government balance-3.5-0.7-4.3-3.0-2.3
Expenditure 3/54.146.445.945.041.5
Of which:
Subsidies and transfers11.511.
Gross public debt21.734.941.050.637.7
Memorandum items:
Nominal GDP (billions of U.S. dollars)60.849.255.255.1
Nominal GDP (trillions of rubels)129.8137.4164.5274.3495.2
Terms of trade8.8-
Real effective exchange rate1.6-4.5-5.0-17.81.3
Official reserves (billions of U.S. dollars)
Months of imports of goods and services1.
Percent of short-term debt40.463.242.056.938.9
Sources: Belarusian authorities; and IMF staff estimates.

Contribution to growth.

Gross consolidated debt of the public sector (central bank and general government debt including publicly guaranteed debt).

Refers to the augmented expenditure of the general government.

Sources: Belarusian authorities; and IMF staff estimates.

Contribution to growth.

Gross consolidated debt of the public sector (central bank and general government debt including publicly guaranteed debt).

Refers to the augmented expenditure of the general government.


Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here:

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