Statement by the IMF Staff Representative on the Republic of Belarus

This paper discusses key findings of the Fourth Review Under the Stand–By Arrangement for Belarus. All end-December quantitative and continuous performance criteria and structural benchmarks were met. Discussions focused on confirming the authorities’ commitment to program objectives, including with regard to lending under government programs, and on measures to reduce or offset the effects of higher prices on oil imports. The authorities also proposed to increase domestic prices of oil products and restructure the oil refining industry to reduce the need for subsidies.

Abstract

This paper discusses key findings of the Fourth Review Under the Stand–By Arrangement for Belarus. All end-December quantitative and continuous performance criteria and structural benchmarks were met. Discussions focused on confirming the authorities’ commitment to program objectives, including with regard to lending under government programs, and on measures to reduce or offset the effects of higher prices on oil imports. The authorities also proposed to increase domestic prices of oil products and restructure the oil refining industry to reduce the need for subsidies.

1. This statement reports on key developments since the staff report (EBS/10/44) was finalized. The new information does not alter the thrust of the staff appraisal.

2. Economic developments since the beginning of 2010 have been broadly consistent with staff projections. GDP grew by 3½ percent year-on-year in the first two months, with a decline in investment more than offset by strong growth in industrial and agricultural output. Twelve-month CPI inflation eased further to about 6 percent in February. The trade deficit narrowed significantly in January compared with a year earlier, reflecting increased external demand for non-energy products. However, credit to the economy expanded by 2.1 percent from end-December to mid-March, compared with an increase of 0.7 percent programmed for the whole first quarter. The authorities believe that all end-March indicative targets will be met, though at present NIR is significantly below, and NDA significantly above the targets. During January and February, net lending under government programs was about 0.7 trillion rubels, compared to a limit of 0.8 trillion rubels (0.5 percent of GDP) for the first quarter, suggesting that the authorities continue to have difficulty controlling lending under government programs. However, the recently passed Council of Minister resolution indicating that the limits agreed for the quarter and the year should be considered as binding by ministries may improve performance under this indicator.

3. During a March 17–19 staff visit the authorities reiterated their interest in a follow-up program and their agreement that this should be based on significant structural reform. The authorities were not ready to propose specific structural measures, but they would like to continue discussions on the macroeconomic framework and the structural reform agenda with a view to completing negotiations on a successor arrangement within the next six months. In light of this, management and the staff consider that beginning post-program monitoring now would not be warranted. If it appeared that negotiations would take significantly longer than six months, management would return to the Board with a proposal to initiate post-program monitoring, possibly in conjunction with the next Article IV consultation for Belarus.

4. The authorities have now confirmed their consent to publication of the LOI and associated Board papers without any corrections or deletions.

Republic of Belarus: Fourth Review Under the Stand: By Arrangement
Author: International Monetary Fund