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.
The Executive Board of the International Monetary Fund (IMF) today completed the second review of Belarus’s performance under an economic program supported by a Stand-By Arrangement (SBA). This decision enables the disbursement of SDR 437.93 million (about US$699.5 million), bringing total disbursements under the program so far to about SDR 1.4 billion (about US$2.23 billion).
The original 15-month SBA was approved on January 12, 2009 (see Press Release No. 09/05). Financial support was subsequently increased to SDR 2.27 billion (about US$3.63 billion) on June 29, 2009 (see Press Release 09/241).
The Executive Board also concluded the 2009 Article IV consultation with Belarus. A Public Information Notice and the staff report will be published in due course.
Following the Executive Board’s discussion on Belarus, Mr. Takatoshi Kato, Deputy Managing Director and Acting Chair, stated:
“Belarus has made good progress in adjusting its policies in response to the global crisis. Despite a substantial decline in exports, the economic contraction has been modest relative to other crisis-hit countries. Exchange rate adjustment has helped reduce external vulnerabilities, with the present exchange regime providing a buffer against external shocks. The adjustment has been supported by a tight fiscal policy, with revenue shortfalls offset by spending cuts, and by an interest rate policy that has kept market rates high in real terms.
“Nevertheless, the strategy of expanding credit under various government programs, while helping to cushion the impact of the crisis on output, put pressure on the external position. The authorities are committed to a tight credit policy, with a view to reducing the current account deficit and pressure on international reserves. The decision to limit lending under government programs in the remainder of 2009 will help contain domestic demand and support the stabilization efforts.
“The authorities have made important progress in their structural reform agenda aimed at improving the business climate and facilitating private sector development. Privatization will play an important part in easing external financing constraints and promoting technological development. The planned setting-up of a Privatization Agency is on track. Reducing the burden of regulation and quantitative targets on the private sector, as well as increasing the commercial orientation of banks, will promote more efficient allocation of resources. It will be important to protect vulnerable groups and enhance the effectiveness of the social safety net.
“The authorities have also progressed well on financial sector reforms, including bringing loan classification and provisioning requirements in line with international practice and improving the framework for crisis preparedness. The commitments to disengage the central bank from non-core business and to enhance its independence are welcome.
“Securing sufficient financial resources from the international community is essential for Belarus’ reform efforts. In this context, the authorities stand ready to implement contingency measures should a financing gap emerge.”