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© 2009 International Monetary Fund
December 2009
IMF Country Report No. 09/333
Republic of Belarus: 2009 Article IV Consultation and Second Review Under the Stand-By Arrangement—Staff Report; Informational Annex; Staff Statement; Public Information Notice on the Executive Board Discussion; and Press Release
The following documents have been released and are included in this package:
The staff report, prepared by a staff team of the IMF, following discussions that ended on September 2, 2009, with the officials of the Republic of Belarus on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on October 5, 2009. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.
A staff statement of October 21, 2009, updating information on recent developments.
A Public Information Notice (PIN).
A Press Release of October 21, 2009.
The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.
Copies of this report are available to the public from
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International Monetary Fund
Washington, D.C.
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INTERNATIONAL MONETARY FUND
REPUBLIC OF BELARUS
Staff Report for the 2009 Article IV Consultation and Second Review Under the Stand-By Arrangement
Prepared by the European Department in Consultation with Other Departments
Approved by Juha Kähkönen and Michele Shannon
October 5, 2009
Executive Summary
Economic background. Belarus has so far survived the global economic crisis with only limited output loss, but its external position remains vulnerable. The difficult external position reflects the severity of the global crisis, especially the decline in demand for and the price of Belarus’s main exports. However, it also reflects delayed adjustment to the fall in exports and more recently the effects of credit expansion under government programs, especially in construction and agriculture.
Program discussions. Fiscal, exchange rate and interest rate policies remain broadly appropriate. The budget targets for 2009 were reaffirmed, and for 2010, the authorities will propose a budget with a modest general government deficit (1.7 percent of GDP). Following the 20 percent devaluation against the U.S. dollar in January 2009, and a subsequent depreciation of 5 percent against a basket of currencies, the exchange rate level appears to be sustainable for the present. Market interest rates are strongly positive in real terms. However, planned increases in credit under government programs threatened the program targets. It was agreed that these plans should be scaled down, and the program now includes a limit on net lending under government programs for the remainder of 2009. Progress is being made on structural reforms agreed under the program. All end-June performance criteria were met. The Belarusian authorities consulted with Fund staff following a decline in reserves in mid-July below targeted levels, and remedial actions were agreed during discussions of the second review. Available data show no clear evidence that any end-September performance criteria will be missed. Staff therefore recommends completion of the second review under the SBA, with a waiver of applicability for end-September performance criteria.
Article IV discussions. For the past decade Belarus has enjoyed high growth founded on high investment levels. But the authorities are well aware that in future the external financing constraint will bite harder, and sustainable growth will require productivity improvements. The staff proposed a menu of reforms to liberalize the economy. The authorities were receptive, though also concerned about the loss of control inherent in liberalization, and the possible social consequences of rapid reform. There was agreement that more foreign direct investment, supported by the stepped up privatization program, could improve productivity and ease the external financing constraint. The authorities reiterated their interest in a successor arrangement to the SBA, incorporating a suitably ambitious structural reform agenda.
Contents
I. Context: The Crisis and the Program
II. Progress So Far: Recent Economic Developments
III. Riding Out the Storm: Policy Discussions on the Program
A. Macroeconomic Outlook
B. Credit, Monetary, and Exchange Rate Policies
C. Fiscal Policies
D. Financial Sector Policies
E. Other Structural Reforms
IV. Program Modalities and Capacity to Repay
V. Looking Beyond the Crisis: Policies to Support Sustainable Growth
A. Reinventing Belarus’s Growth Model
B. Supporting Macroeconomic and Financial Sector Policies
VI. Staff Appraisal
Boxes
1. Lending Under Government Programs
2. Banking System Stress Tests
3. Is There a Need for Further Adjustment in the Exchange Rate Regime or Level?
4. Belarus’s Economic Model
5. A Menu for Structural Reforms
Tables
1. Selected Economic Indicators, 2007–14
2. Balance of Payments, 2007–14
3. Fiscal Indicators and Projections, 2007–10
4. Monetary Authorities’ Accounts, 2007–10
5. Monetary Survey, 2007–10
6. Banking Sector Soundness Indicators, 2005–09
7. Financing Requirements Under the Program, 2009–10
8. Indicators of External Vulnerability, 2005–09
9. Capacity to Repay the Fund, 2009–14
Appendix
I. Debt Sustainability Analysis, 2004–14
II. Letter of Intent, and Technical Memorandum of Understanding
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INTERNATIONAL MONETARY FUND
REPUBLIC OF BELARUS
Staff Report for the 2009 Article IV Consultation and Second Review Under the Stand-By Arrangement—Informational Annex
Prepared by the European Department in Consultation with Other Departments and the World Bank
October 5, 2009
Contents
I. Fund Relations
II. World Bank Relations
III. Statistical Issues
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Public Information Notice (PIN) No. 09/135
FOR IMMEDIATE RELEASE
December 15, 2009
International Monetary Fund
700 19th Street, NW
Washington, D. C. 20431 USA
Telephone 202-623-7100 • Fax 202-623-6772 • www.imf.org
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Press Release No.09/363
FOR IMMEDIATE RELEASE
October 21, 2009
International Monetary Fund
700 19th Street, NW
Washington, D. C. 20431 USA
Telephone 202-623-7100 • Fax 202-623-6772 • www.imf.org
