Press Release: IMF Approves Stand-By Credit for the Republic of Belarus

September 12, 1995

The International Monetary Fund (IMF) today approved a 12-month stand-by credit for the Republic of Belarus equivalent to SDR 196.3 million (about $293 million) in support of the Government's economic program for 1995/96.


Since its independence in 1992, Belarus has undertaken significant reforms to transform its economy from central planning to one based on market mechanisms, albeit at a somewhat uneven pace. In mid-1994, the newly elected Government adopted measures to restore financial discipline, and steps were taken to sharply reduce the burden of subsidies on the budget. Progress has been achieved in many areas: a tightening of budgetary expenditures in the second half of 1994 allowed for a significant turnaround in the deficit of the general government; prices were freed; and market mechanisms for the allocation of credits by the National Bank of Belarus (NBB) were strengthened. The trade performance improved as well, but progress in reducing inflation remained elusive because of the continuous extension of credit to the ailing sectors of the economy by the NBB. Although inflation has declined sharply during the second quarter of 1995, economic activity continued to contract with the decline of GDP estimated at 11 percent in the first half of the year. Further, implementation of systemic reforms has fallen short of targets, especially in the area of privatization and enterprise reform.

The 1995-96 Program

The broad objectives of the Belarussian authorities' economic program for 1995/96 are to make further progress toward reaching price stability, achieve a sustainable balance of payments position, and establish a market economy, with a view to laying the foundation for sustainable growth. The overall economic objectives aim at limiting the decline of GDP to 13.8 percent in 1995 and 3.0 percent in 1996; containing the rate of monthly inflation to to 1 percent by the end of 1995 and 0.5 percent by the end of 1996; reducing the external current account deficit to around 4 percent of GDP in 1995 and 1996; and building up the level of gross international reserves to the equivalent of 1.7 months of imports by the end of the program period.

To these ends, fiscal policy is centered on reducing the cash defecit of the general governement to 3.2 percent of the GDP for 1995 as a whole. Measures to achieve this include, on the revenue side, increasing excises, limiting tax exemptions, adn strengthening the collection of taxes and social security contributions; and on the expenditure side, containing subsidies and net lending as well as the wage bill and other discretionary outlays. Monetary policy will aim at maintaining poisitve real interest rates and limiting the expansion in base money.

Structural Reform Policies

The Government will further pursue its price liberalization policy, deepen the reforms of the foreign exchange market, and take significant steps in the direction of a comprehensive liberalization of foreign exchange and external trade transactions. It will adopt measures to (i) further reduce barriers to private sector development; (ii) give a clear impetus to the corporatization and privatization process; (iii) encourage enterprises to become financially more responsible and to restructure; and (iv) adopt legislation on private ownership of land.

Addressing Social Costs

Within the budget targets, the authorities will provide financing for a social safety net to partially compensate the most vulnerable groups of the population for the impact of increases in tariffs for household services and utilities.

The Challenge Ahead

Full and sustained implementation of the program will require that the authorities continue to resist pressures from various lobbies for more credit and subsidies; closely monitor the situation of banks; avoid any further deterioration in tax revenue; and implement effectively the program's systemic reforms.

The Republic of Belarus became a member of the IMF on July 10, 1992; its quota1 is SDR 280.4 million (about $418 million), and its outstanding use of IMF credit currently totals SDR 140.2 million (about $209 million).

Republic of Belarus: Selected Economic Indicators

  1993 1994 1995* 1996*


(percent change)

Real GDP growth –10.6 –20.2 –13.8 –3.0
Consumer prices (percent change of period average) 1,118.0 2,220.0 703.0 32.0

(in millions of US dollars) 

External current account balance (deficit –) –338.0 –545.0 –379.0 –412.0

(percent of GDP)

Government budget balance (deficit –) –1.8 –1.7 –3.2 –2.0

Sources: Belarussian authorities; and IMF staff estimates.

1. A member's quota in the IMF determines, in particular, the amount of its subscription, its voting weight, its access to IMF financing, and its share in the allocation of SDRs.


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