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
Author: International Monetary Fund
Publication Date:
30 Dec 2009
eISBN:
9781451805321
ISBN:
9781451805321
Language:
English
Keywords:
ISCR; CR; September; reform effort; policy; draft decree; anti-crisis fund; end-December NIR; banking system; financial support; financing constraint; nominal exchange rate; transmission mechanism; Loans; Global
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This 2009 Article IV Consultation highlights that Belarus has so far escaped a significant fall in output, despite a sharp fall in external demand. GDP declined 0.5 percent year over year in the first eight months of 2009, comparing favorably to Belarus’ main trading partners. Economic activity has been bolstered by strong domestic demand, especially for housing construction financed under government programs. Executive Directors have applauded the authorities’ commitment to a tight fiscal policy, with revenue shortfalls being offset by spending restraint while protecting priority social spending.

Abstract

This 2009 Article IV Consultation highlights that Belarus has so far escaped a significant fall in output, despite a sharp fall in external demand. GDP declined 0.5 percent year over year in the first eight months of 2009, comparing favorably to Belarus’ main trading partners. Economic activity has been bolstered by strong domestic demand, especially for housing construction financed under government programs. Executive Directors have applauded the authorities’ commitment to a tight fiscal policy, with revenue shortfalls being offset by spending restraint while protecting priority social spending.

I. Context: The Crisis and The Program

1. At the outset of the global economic crisis, Belarus was in a highly vulnerable position. The domestic economy was overheating, and the real effective exchange rate had appreciated sharply during the second half of 2008. The current account deficit was already high and reserves precariously low. Moreover, Belarus’s exports were highly concentrated—dominated by exports of manufactured goods to Russia (for which demand fell fast) and oil products to the European Union (for which the price was about to fall precipitously). Households were losing confidence in the currency. Faced with rapidly declining reserves, Belarus turned to the Fund for support.

2. The Fund-supported program aimed to balance sufficient adjustment to correct external imbalances with sufficient financing to avoid excessive contraction. The centerpiece of the program was a 20 percent devaluation of the exchange rate and a shift in the peg to a basket of currencies. The exchange rate adjustment was supported by tight income and fiscal policies and increases in interest rates. Fund financing was substantial, and was augmented when it became clear that the fall in Belarus’s exports was even larger than had been projected. Recent economic developments suggest that the program has helped to limit the damage from the crisis, but that external adjustment remains limited. The main focus of the discussions on the second review of the SBA was therefore on policy tightening to improve the external position. The main focus of the Article IV Consultation discussions was on the longer term policies needed to produce sustainable growth in a post-crisis world.

II. Progress So Far: Recent Economic Developments

3. Belarus has so far not experienced a significant fall in output, despite a sharp fall in external demand. GDP declined 0.5 percent year-on-year in the first eight months of 2009, as opposed to the 10.9 percent growth registered in the corresponding period in 2008 but still by less than Belarus’s main trading partners. Economic activity has been bolstered by strong domestic demand, especially fixed investment which expanded by 16.9 percent, due mainly to housing construction financed under government programs.

4. Inflation has fallen. Twelve-month CPI fell to 12.5 percent in August, as the impact of the negative output gap eclipsed the effects of exchange rate depreciation and utility price adjustment early in the year.

uA01fig01

Contributions to GDP Growth

(Percent)

Citation: IMF Staff Country Reports 2009, 333; 10.5089/9781451805321.002.A001

Sources: National Statistical Committee; and IMF staff calculations.
uA01fig02

Inflation

(Percent)

Citation: IMF Staff Country Reports 2009, 333; 10.5089/9781451805321.002.A001

Sources: Belarusian authorities; and IMF staff calculations.

5. The current account deficit has widened, and international reserves remain low. Export value contracted by 46 percent year-on-year during the first seven months of 2009, reflecting a sharp reduction in demand, especially by Russia. Imports fell by 35 percent. The energy balance also worsened, as export prices for oil products fell more than import prices of crude oil. The resulting current account deficit ($3.7 billion in the first half of 2009) was partially offset by net financial inflows, including privatization proceeds, trade credits, and government borrowing. Disbursement of the final $500 million tranche of a $2 billion loan from Russia has been delayed. However the Russian authorities expect to make the disbursement later in the year. There will be a $200 million loan from the World Bank. The European Commission will also propose a 200 million Euro loan under the EU’s macro financial assistance policy. The rollover rate on debt of the banking system has been about 75 percent, and the risks are limited given the moderate size of scheduled repayments by the banking system ($485 million in the second half of 2009). Currency substitution, which accounted for large reserve loss at the beginning of the year, came to a halt in early June and has been partially reversed since. Gross international reserves began to fall in early July, and declined to below $3 billion in late August. Remedial actions were agreed with staff during discussions on the second review and reserves have begun to recover. Gross reserves have also been boosted by the recent SDR allocations amounting to about $570 million.

uA01fig03

International Reserves

(Billions of U.S. dollars)

Citation: IMF Staff Country Reports 2009, 333; 10.5089/9781451805321.002.A001

Source: National Bank of the Republic of Belarus.
uA01fig04

Household Deposits 1/

(Trillions of Belarusian rubels)

Citation: IMF Staff Country Reports 2009, 333; 10.5089/9781451805321.002.A001

Source: National Bank of the Republic of Belarus.1/ Deposits held with the six largest banks operating in Belarus.2/ Forex deposits shown excluding valuation changes (at constant exchange rate as of January 2).

6. The fiscal adjustment remains strong and on track, with further revenue shortfalls being offset by spending restraint. The effects of the crisis continue to be felt, especially through lower profit tax and excise revenue. The authorities have responded with cuts in expenditures for goods and services and “other expenditures”. As agreed at the time of the first review, local government deficits financed from accumulated surpluses and foreign-financed net lending under projects approved before the program, do not need to be offset by additional adjustment by the central government. As a result, the projected consolidated budget deficit could reach 1.7 percent of GDP in 2009.

7. The exchange rate has remained broadly stable since end-June. Following the depreciation of the rubel during May and June, and the widening of the trading band from 5 percent to 10 percent in June, the exchange rate has varied little against the basket of currencies.

uA01fig05
Source: National Bank of the Republic of Belarus.1/ The Belarusian rubel per U.S. dollar rate as set at the Belarusian Currency and Stock Exchange (BCSE). The BCSE rate is set as the official rate for the following day.2/ The basket rate is calculated using BCSE exchange rates.

8. Market interest rates remain high in real terms. The NBRB increased the interest rate on overnight loans by two percentage points in June, while leaving the refinancing rate unchanged, and interbank interest rates are usually over 20 percent. As inflation subsided, market-determined interest rates increased sharply in real terms.

uA01fig06

NBRB Policy Interest Rates and the Interbank Rate

Citation: IMF Staff Country Reports 2009, 333; 10.5089/9781451805321.002.A001

Sources: Belarusian authorities; and IMF staff estimates.
uA01fig07

Real Overnight Interbank Rate

(Percent)

Citation: IMF Staff Country Reports 2009, 333; 10.5089/9781451805321.002.A001

Sources: Belarusian authorities; and IMF staff calculations.

9. However, lending under government programs has continued to increase at a high rate (Box 1). In the first half of 2009, gross disbursements under government programs were some 40 percent higher than in the corresponding period of 2008. The share of such lending in overall credit to economy increased from 33 percent in December 2008 to 38 percent in July 2009. This lending helped propel high rates of investment and domestic demand and therefore contributed to the loss of reserves.

10. Financial soundness indicators remain broadly satisfactory except for insufficient liquidity in some banks. The aggregate capital adequacy ratio has declined slightly, but remains sufficiently high to cope with a variety of potential stress test scenarios (Box 2). Nonperforming loans remain low, though they are expected to increase further. Profitability has slightly decreased. Liquidity indicators are a source of concern, especially for state-owned banks, some of which do not comply with the prudential liquidity ratios. The persistent vulnerability of these banks to liquidity risk stems from their significant involvement in lending under government programs.

III. Riding Out the Storm: Policy Discussions on the Program

A. Macroeconomic Outlook

11. So long as credit growth is contained, the program targets for 2009 remain within reach. Based on tight fiscal and monetary policies in the period ahead, supported by the imposition of a limit on credit under government programs, GDP is projected to decline by about 1 percent in 2009. Significant import contraction in the last few months of the year is expected to contain the current account deficit to around 9½ percent of GDP. This, together with financial support from international donors, will help attain the gross reserve target for 2009. For 2010, the aim should be to bring down the current account deficit further to 7 percent of GDP and increase gross reserves to at least $7 billion (about 2½ months of imports). With the expected recovery of external demand, which will facilitate a modest rebound of output in the order of 2 percent, this can be achieved with a fiscal policy stance similar to that of 2009 and a credit increase in line with nominal GDP. However, an unrestrained credit policy would enlarge further the saving-investment gap, leading to a current account deficit of 13 percent of GDP in 2009 and (if continued on a similar scale) 11 percent in 2010, and a cumulative shortfall of gross reserves by end-2010 of about $4 billion compared with the target of the original program. The authorities broadly agreed with this analysis, though they were more optimistic about export prospects and external financing going forward, and favored a smaller reduction in credit growth.

Lending Under Government Programs

The government is an active player in the financial system, and bank lending under various government programs remains a distinctive feature in Belarus. Government programs are typically implemented via presidential decrees or resolutions of the Council of Ministers which recommend lending to particular projects, sectors, or companies, often at highly subsidized interest rates. Disbursements and repayments are done outside the regular budget process, but a part of the interest payments is subsidized by the budget: borrowers typically pay a subsidized rate to the banks and the government compensates the banks for the difference between the subsidized and the “market” rate which is typically set at a certain margin over the NBRB’s refinancing rate. Many of recommended credits carry state guarantees (Box 1 in the 2009 FSAP Update). There has been a sharp increase in lending under government programs over the period of 2005-09, with the bulk of credits going to agriculture and construction.

State-influenced lending is generally distortive. It interferes with the development of a sound risk culture, precluding the proper pricing and efficient allocation of credit in accordance with inherent risk. Such lending also blocks normal monetary policy transmission mechanism by inducing credit expansion at non-market terms.

The Fund staff has consistently expressed concern about these lending programs. In December the authorities agreed not to initiate new programs financed with government deposits and placed a ban on transferring additional government deposits to commercial banks in order to set the stage for transforming state banks into more market-oriented entities. Nevertheless, while overall monetary limits under the program framework were met, lending under government programs continued in early 2009 using non-government deposit financing, prompting expressions of concern in the staff report in the first review of the SBA that subsidized lending crowds out lending to the private sector. Since then, lending under government programs has increased even more rapidly. The share of such lending in overall credit to economy increased from 33 percent at end-2008 to 38 percent in July 2009.

At the same time, under pressure to meet the lending targets specified in decrees and resolutions, banks turned to the nBRB for refinancing. The NBRB supported this lending using mechanisms outside its standard refinancing facilities (via ad hoc decisions of NBRB Board), increasing the stock of such support by some 1.9 trillion rubels (1.4 percent of GDP) in the first half of 2009 and by a similar amount in July-August 2009 (the average interest rate for refinancing of these programs at the end of August averaged to 9.3 percent, negative on a real basis).

uA01bx01fig01
Sources: National Bank of the Republic of Belarus; and IMF staff calculations.1/ The flows in H1 2009 are shown at program exchange rates.

Banking System Stress Tests

Stress tests based on the end-June 2009 data show that banks have sufficient capital buffers to withstand the assumed shocks (see table) but are significantly vulnerable to liquidity risk.

Despite a small decrease in the aggregate capital adequacy ratio (CAR) since late 2008, banks would remain sufficiently capitalized in the considered stress test scenarios. In the scenario of an increase in the ratio of nonperforming loans to total loans by 15 percentage points, the aggregate CAR would drop from 19.1 percent to 12.4 percent, which is sufficiently above the prudential minimum of 8 percent. The direct effects of exchange rate or interest rate risk remain insignificant. Stress-tests based on macro scenarios, which the NBRB has recently performed in the context of the region-wide stress testing exercise organized by the IMF staff, also suggest that bank capital would stay above the prudential minimum even in the event of a significant macroeconomic slowdown.

State-owned banks are significantly vulnerable to liquidity risk. As of end-June 2009, the actual current liquidity ratio was 95 percent for the banking sector as a whole, but only 76 percent for state-owned banks, which is only marginally above the prudential minimum of 70 percent. Under the considered stress test assumptions (a 10 percent withdrawal of domestic liabilities or a 25 percent withdrawal of liabilities to nonresidents), state-owned banks as well as the largest banks would end up with the current liquidity ratio below the statutory minimum. The vulnerability of state-owned banks to liquidity risk, which had already been emphasized by the results of stress tests in the past, stems from the significant involvement of these banks in lending under government programs.

Sensitivity Stress Test Assumptions and Results

(Based on end-June, 2009 data)

article image
Source: National Bank of the Republic of Belarus.

The current liquidity ratio is the ratio of assets with a remaining maturity of less than one month to liabilities with a remaining maturity of less than one month.

uA01fig08

Adjustment and High-Credit Scenarios

Citation: IMF Staff Country Reports 2009, 333; 10.5089/9781451805321.002.A001

Source: IMF staff estimates.

12. Medium-term prospects depend critically on the implementation of structural reforms to improve the country’s growth potential and reduce external vulnerability. Reforms aimed at fostering a dynamic private sector and increasing the role of market in resource allocation would boost productivity and ease external financing constraints (discussed in Section V), realizing a medium-term potential growth of 7 percent. Under this scenario, which also envisages low fiscal deficits and a prudent monetary policy that contains inflation to moderate single-digits, the current account deficit will gradually fall and stabilize at around 3½ percent of GDP. The capital inflows associated with accelerated privatization will help increase gross reserves to cover about three months of imports, providing a buffer against external shocks. Under a more hesitant approach to reforms, the external financing constraint would bite harder, putting constraints on a growth model reliant on high investment. Medium-term growth would be expected to be 2 percentage points lower, reflecting financing constraints and lower productivity growth. External vulnerability will remain, reflected in high current account deficits and external debt. The authorities broadly agreed but emphasized the strengths in their growth model and their ongoing efforts to improve the business environment.

B. Credit, Monetary, and Exchange Rate Policies

13. A tight credit policy is critical for external sustainability. Sharp expansion of lending under government programs, mainly to agricultural and construction sectors, has resulted in strong aggregate investment and domestic demand and has put substantial pressure on the current account and international reserves. The authorities originally planned to increase this lending even more in the second half of 2009 arguing that agriculture and construction have low import intensity and therefore could be used as the means for pulling the economy out of the recession. Staff disagreed, noting that such an expansion would have direct and indirect effects on domestic demand, and hence on the balance of payments (see paragraph 11). The authorities accepted these arguments and have agreed to limit lending under government programs to 4 trillion rubels for the second half of 2009.1 This is necessary to return NDA and NIR to a path consistent with the program objectives, and is also expected to improve banks’ liquidity ratios. The limit will initially be implemented through NBRB recommendations to commercial banks. The issues of limits for 2010 will be taken up in the context of discussions of the third review.

Basis for a Limit on Credit under Government Programs in 2009

article image
Source: IMF staff calculations.

14. The authorities will also contain domestic demand in the remainder of 2009 by limiting credit and imports by state enterprises with high levels of inventories. State enterprises have been slow to respond to the fall in domestic and external demand, in part because they have tried to adhere to output targets set before the crisis. As a result inventories have increased sharply. The NBRB has now issued recommendations to banks to restrict credit to enterprises with high levels of inventories, to curtail their demand for further imports, and the government has required state enterprises to secure authorization for additional imports from supervising ministries. These short-term measures are already bearing fruit and are expected reduce demand for imports by about $400 million in the remainder of 2009, helping the authorities to meet the reserves targets under the program.2

uA01fig09

Inventories and Production

Citation: IMF Staff Country Reports 2009, 333; 10.5089/9781451805321.002.A001

Sources: Belarusian authorities; and IMF staff calculations.1/ Lagged 12-month moving average of industrial production.

15. The NBRB will continue to use interest rate policy to contain credit and domestic demand. Market interest rates are now well above the expected rate of inflation, and the authorities would like to begin reducing them. However, they accepted staff advice that such a reduction should await clear evidence that they are on track to meet targets for external reserves and that the process of de-dollarization is well established.

16. The level of exchange rate appears to be appropriate based on agreed policies (Box 3).3 Comparing the current account norm with the staffs medium-term projections implies only a marginal overvaluation of 2 to 4 percent. The external sustainability approach also indicates that the net external asset position can be broadly sustained without a major correction in the exchange rate. At present, given the importance of the nominal exchange rate in shaping public expectations, staff agreed with the authorities that the current exchange rate regime would serve the country well in the near term. However, the staff advised the authorities to make use of flexibility available under the ±10 percent band, especially if reserves targets appear to be at risk for reasons other than insufficiently tight credit policy.

C. Fiscal Policies

17. The authorities remained committed to fiscal restraint, an important anchor of the adjustment strategy. They planned to offset the estimated revenue shortfall (0.5 percent of GDP) by savings on unallocated appropriations, goods and services, and investment of the central government. They decided to further defer the wage increase and increase charges for transportation and utilities (which will reduce the need for subsidies) to help rein in spending, making room for a pension increase of up to 10 percent this year. Local budgets’ expenditure will be monitored closely and, when possible, kept in line with revenue performance. The authorities remain committed to shielding social sectors from spending cuts.

18. The deficit limit of 1.7 percent of GDP in the draft 2010 budget is consistent with program objectives. Under the proposed budget, the tax burden will be reduced by 2½ percent of GDP, mostly by eliminating the turnover tax and local sales taxes. Expenditure on goods and services and investment spending will be reduced. Increases in charges for transportation and utilities in early 2010 will rein in transfers, but interest rate subsidies and those for oil refineries will continue to put pressure on the budget. The wage bill will increase in line with nominal GDP. A presidential decree to increase targeted assistance will double subsidies and transfers to the poor. The Ministry of Finance will also propose additional investment spending (1.3 percent of GDP), which would restore investment spending to its 2009 level as a share of GDP, but the inclusion of this spending in the 2010 budget is contingent on securing revenue sufficient to offset the effects on the deficit. To this end, a proposal to increase the VAT rate by 3 percentage points is under discussion.4

Is There a Need for Further Adjustment in the Exchange Rate Regime or Level?

Adopting the currency basket with flexibility around a central parity was well suited for riding out the crisis. The substantial misalignment observed at the end of 2008 has been largely corrected and there is no need for further significant exchange rate adjustment. Sustainability of the current rate, however, is conditional on maintaining tight control of domestic demand.

The switch to the currency basket in January 2009 accompanied by a nominal correction reversed the erosion of competitiveness. The basket preserved the function of a nominal anchor essential for maintaining external stability, but at the same time safeguarded Belarus’ competitiveness in the environment of significant volatility of major trading partners’ currencies. The band around a central parity provided a cushion for responding to shocks. Until the institutional framework required for a credible alternative nominal anchor is in place, the basket peg will serve to preserve stability.

The CPI-based REER suggests that Belarus experienced a substantial loss of competitiveness in the last half of 2008 but regained it in the first half of 2009 on account of a step devaluation in January and further depreciation in May-June 2009. The ULC-based REER suggests broadly the same conclusions. To the extent that pressure on reserves continues, it comes from insufficiently tight credit policies.

uA01bx03fig01

CPI-based Real Exchange Rate Indexes

(2007=100)

Citation: IMF Staff Country Reports 2009, 333; 10.5089/9781451805321.002.A001

The macroeconomic balance approach suggests only a marginal overvaluation, which, given inherent uncertainty in equilibrium exchange rate assessments, does not provide sufficient ground for recommending another substantial adjustment of the nominal exchange rate. The current account norm (based on the CGER model with Belarus’ equilibrium values of regressors), is estimated at -2 to -2.7 percent of GDP. The underlying current account deficit, which is likely to appear in the medium-term if Belarus follows policies agreed under the second review of the program, is 3.5 percent of GDP. This implies a marginal overvaluation of 2-4 percent. If, however, domestic demand policies fail to adjust the underlying current account deficit would be much wider, implying a substantial misalignment of the exchange rate.

The external sustainability approach leads to a similar qualitative conclusion. Policies outlined in the Letter of Intent would be consistent with stabilizing Belarus’ net external asset position (NEAP) at its present level (30 percent of GDP at the end of the first quarter of 2009). Without adjustment in domestic policies, sustaining the present NEAP position would require a REER adjustment of about 15 percent.

D. Financial Sector Policies

19. In addition to limiting lending under government programs, discussions focused on the need to reduce government involvement in other aspects of the financial sector. In particular:

  • Staff emphasized that NBRB liquidity support to banks on non-market terms should be phased out. The growth in lending under government programs (para 13) has been significantly funded by the NBRB liquidity support to (state-owned) banks outside standard refinancing facilities. This NBRB refinancing has been extended to banks at the below market interest rates and on non-transparent terms and conditions. The staff expressed concern that this type of bank refinancing goes against the proclaimed intention to disengage the NBRB from non-core business, and distorts effective competition among banks. The authorities believed that providing liquidity support at below market rates is necessary to prevent commercial banks from incurring losses on their lending under government programs. However, they acknowledged the problem, and by end-December 2009 they will agree with IMF staff a schedule for phasing out this support.

  • There was agreement on the need to enhance NBRB independence. Following the recommendations of the recent Safeguard Assessment and FSAP Update, the authorities are preparing amendments to key financial sector legislation, including the Statute of the NBRB. These institutional changes should help improve the effectiveness of both banking supervision and monetary policy implementation.

  • There was also agreement that the NBRB should disengage from non-core business. To this end, by end-December 2009, the authorities will develop an action plan for sales to private investors of all NBRB non-financial subsidiaries and associated companies.

uA01fig10

NBRB Claims on Banks

(Trillions of Belarusian rubels)

Citation: IMF Staff Country Reports 2009, 333; 10.5089/9781451805321.002.A001

Source: National Bank of the Republic of Belarus.

E. Other Structural Reforms

20. The authorities and staff agreed on the importance of accelerating the privatization program. Tangible progress has been achieved in developing a legal framework for privatization to become competitive, transparent, and professionally executed. A draft Privatization Law and a draft decree on establishing a privatization agency will be submitted to the President by September 30, 2009. A privatization agency is expected to become operational shortly after the relevant decree is enacted, focusing on preparing several large enterprises for privatization through an open, international, transparent, and competitive tender by end-February 2010.

21. Further steps in curtailing the government’s involvement in the economy are planned. The authorities agreed to desist from setting quantitative targets, including for output and employment, in enterprises where the government has only a minority shareholding. The authorities plan to further liberalize prices this year by reducing the number of products subject to price controls and trade margins, consistent with the World Bank recommendations. However, more needs to be done in improving the flexibility in setting wages, as the corporate sector remains subject to the unified pay grading system. The authorities also need to refrain from taking protectionist measures in response to the current crisis.5

IV. Program Modalities and Capacity to Repay

22. The attached Letter of Intent summarizes the progress in implementing the economic program. All quantitative and continuous performance criteria for end-June were met.6 As committed in the letter, the authorities suspended the adoption of new government lending programs. They also eliminated all instructions that are not consistent with their commitment not to impose a general ceiling on monthly price increases. The structural benchmark to engage a consultant to assist in preparing state-owned banks for privatization was partially met, as the authorities selected an international consultant to assist in the privatization of one bank, and plan to engage consultants for other banks once strategic investors for those banks are identified. The authorities are on track to submit to the Head of State a draft Decree on establishing a Privatization Agency, and bring loan classification and provisioning requirements in line with best international practices, two structural benchmarks for end-September.

23. The Letter also sets out policy commitments for the remainder of 2009. With data yet to be released and assessed and no evidence that the performance criteria will not be met, the authorities are requesting a waiver of applicability of the end-September quantitative performance criteria, which is supported by staff. The end-December indicative targets, adjusted upwards (NIR) and downward (NDA) by 100 percent of the equivalent of the amount of the recent SDR allocations, are proposed to be established as the performance criteria.7 The measures envisaged in the Letter, together with financing from international donors, are expected to bring the gross reserves to targeted levels for the program period. A financing gap of about $300 million had emerged in 2009, but this is now expected to be filled by additional financing from the EU. Thus, the program is fully financed. With regard to 2010 beyond the program period, additional adjustment or financing would still be required to bring reserves up to a more comfortable level. To strengthen the program, an additional structural benchmark is proposed to reflect the authorities’ commitment to refrain from imposing quantitative targets on companies that do not benefit from government’s financial support and in which the government has only a minority share.

24. Belarus’s capacity to repay the Fund remains adequate. The level of Fund credit outstanding is expected to reach 49 percent of gross international reserves at its peak in 2010, and Fund repurchases and charges would amount to 37 percent of total debt service in 2013 (Table 9). The risks are manageable given the still moderate level of gross external debt (expected to peak at 43 percent of GDP in 2010 and fall thereafter as the current account deficit declines). Additional comfort stems from the fact that the public debt will remain below 30 percent of GDP even at its peak in 2010, reflecting the government’s commitment to sound fiscal policy (Appendix I).

Table 1.

Belarus: Selected Economic Indicators, 2007–14 1/

article image
Sources: Belarusian authorities; and IMF staff estimates.

In Tables 1-3, program columns refer to what is agreed during the first review of the Stand-By Arrangement.

Contribution to growth.

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

Table 2.

Belarus: Balance of Payments, 2007–14

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Table 2.

Belarus: Balance of Payments, 2007–14 1/ (concluded)

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Sources: Belarus authorities; and IMF staff estimations.

Includes projections of unaccounted flows of $250 million for 2009 onwards. Previously, recorded under errors and omissions.

Disbursements and repayments are based on the schedule agreed at the time of the first review.

In 2009, Russia’s remaining budget support of $500 million is included as government loan in the program column, but as other donors’ financing in the projection column. Other donors’ financing in the projection column also includes $200 million from the World Bank and the equivalent of about $290 million from the EU.

Projected overperformance in 2009 is due to the SDR allocations.

Table 3.

Belarus: Fiscal Indicators and Projections, 2007–10

(Trillions of Belarusian rubels, unless otherwise indicated)

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Table 3.

Belarus: Fiscal Indicators and Projections, 2007–10 1/ (concluded)

(Percent of GDP, unless otherwise indicated)

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Sources: Ministry of Finance; SPF; and IMF staff estimates.

Includes changes in expenditure arrears.

For 2009, net lending excludes project financing committed before the start of the program (US$353 million).

The actual deficits include all the closing expenditure for the year carried out in January of the following year and correspond to the authorities fiscal year reports. The deficit includes January closing expenditure in the year they were actually paid.

Includes statistical discrepancy up to 2008.