On December 9, 2013, the Executive Board of the International Monetary Fund (IMF) concluded the Fifth Post-Program Monitoring Discussions with Belarus.1
Growth in Belarus has remained slow, reaching only 1.1 percent (year-on-year) in the first nine months of 2013, with high real wage increases and rapid directed lending growth contributing to widening external imbalances. Inflation fell in the first half of the year, but it has rebounded from September and remains in double-digits.
Owing to a mix of strong domestic demand growth, a slowdown in the Russian economy, and weakening competitiveness of Belarusian goods, the current account balance has deteriorated, reaching a 9½ percent of GDP deficit in the first half of the year. Reserves have fallen and covered about 1.7 months of imports in October.
Banks are under pressure, including because of shortages in rubel funding related to the public’s increasing preference for holding foreign currency. Foreign currency lending growth slowed substantially in 2013, but remains high at around 20 percent during January–September. Also, loan dollarization continued to rise, reaching 48 percent of total loans in September.
In October, the National Bank and the government adopted a new joint action plan that would start partial reforms in a number of key areas including price liberalization and privatization.
Meanwhile, the authorities continued to engage with the WTO in the context of the working group on accession of Belarus.
The outlook is for continued slow growth and a difficult balance of payments position in the short-term. Risks are heavily tilted to the downside. In particular, a further worsening of the current account or the financial account could increase pressures on reserves and the rubel. Banking risks also remain a concern, including on account of the still-rapid foreign exchange lending growth.
Post-Program Monitoring provides for more frequent consultations between the Fund and members whose arrangement has expired but that continue to have Fund credit outstanding, with a particular focus on policies that have a bearing on external viability. There is a presumption that members whose credit outstanding exceeds 200 percent of quota would engage in Post-Program Monitoring.