IMF Executive Board Concludes First Post-Program Monitoring Discussions with the Republic of Belarus

Public Information Notice (PIN) No. 11/119
September 13, 2011

Public Information Notices (PINs) form part of the IMF's efforts to promote transparency of the IMF's views and analysis of economic developments and policies. With the consent of the country (or countries) concerned, PINs are issued after Executive Board discussions of Article IV consultations with member countries, of its surveillance of developments at the regional level, of post-program monitoring, and of ex post assessments of member countries with longer-term program engagements. PINs are also issued after Executive Board discussions of general policy matters, unless otherwise decided by the Executive Board in a particular case. The staff report (use the free Adobe Acrobat Reader to view this pdf file) for the First Post-Program Monitoring Discussions with the Republic of Belarus is also available.

On August 29, 2011, the Executive Board of the International Monetary Fund (IMF) concluded the first Post-Program discussions with Belarus.1


Belarus is experiencing an economic crisis. After the expiration of a Stand-By Arrangement in March 2010, policies were loosened significantly. As a consequence, the current account deficit increased and the pressure on reserves intensified. After a significant loss of reserves in early 2011, confidence in the rubel fell, sparking a foreign exchange crisis and forcing the central bank to cease interventions. Foreign exchange shortages ensued, the foreign exchange markets became fragmented and a parallel market appeared.

The authorities’ efforts to resolve the crisis have so far been insufficient to restore market confidence. After initial attempts to deal with the crisis with administrative measures, the authorities agreed a package of measures with the Eurasian Economic Community’s Anti-Crisis Fund (ACF), under a US$3 billion loan agreement. The announced measures include tightening of macroeconomic policies and structural reforms. However, they are not being consistently implemented: the multiple exchange rate system persists and interest rates are still negative in the real terms.

The foreign exchange crisis has affected economic activity and increased inflation. GDP growth is expected to slow down from 11 percent in the first half of the year to 5½ percent in 2011 and further to 1½ percent in 2012, mainly via a sharp slowdown and a subsequent contraction of domestic demand. Spurred by significant depreciation of the rubel, 12-month rate of inflation reached 43 percent in June 2011 and is expected to accelerate to over 50 percent by the end of the year.

Executive Board Assessment

Executive Directors regretted that weak macroeconomic policies led to a further, sharp deterioration in the economy, contributing to a widening of the external current account deficit and a crisis in the foreign exchange market. Directors underscored that comprehensive macroeconomic adjustment and structural reforms, as well as strong political commitment, are critical to address the root causes of vulnerabilities and restore external stability.

Directors welcomed the authorities’ commitments under the loan agreement with the ACF. They agreed that the authorities’ plans to reduce the fiscal deficit, raise interest rates, limit lending under government programs, and unify multiple exchange rates are steps in the right direction, but stressed the importance of firm and consistent implementation.

Directors urged the authorities to restore external stability through further fiscal and monetary policy tightening. They supported floating the rubel to unify exchange rates and allow the needed external adjustment. A few Directors considered that a substantial reserve buffer is needed before such a move. Directors underscored that public wage restraint should help contain exchange rate and price pressures. They also recommended putting in place an efficient social safety net to protect the most vulnerable segment of the population.

Directors noted the low reported nonperforming loan levels in the banking system and capital adequacy ratios above prudential norms. In this context, some Directors expressed concern over the elevated liquidity, credit, and rollover risks in the system. Directors underscored the need for close monitoring of financial sector developments, while stressing the importance of increasing the role of market mechanisms and eliminating distortions.

Directors called on the authorities to demonstrate a consistent commitment to structural reforms. They urged the authorities to step up price liberalization and make the Development Bank and the National Investment and Privatization Agency fully operational without delay. Directors also encouraged the authorities to embark on an enterprise reform to facilitate corporate sector adjustment and strengthen competitiveness.

Directors stressed that financial support from the Fund will require demonstrated commitment to strong policies and structural reforms.

Belarus: Selected Economic Indicators, 2007–11
  2007 2008 2009 2010 2011
        Prel. Proj.
  (Annual percentage change, unless otherwise specified)

National accounts


Real GDP

8.6 10.2 0.2 7.6 5.5

  Total domestic demand

11.9 17.8 -1.1 10.9 2.4


9.7 12.5 0.0 8.2 1.8


13.4 16.3 0.0 10.1 2.7


-0.5 0.3 -0.1 0.9 -2.0


16.4 28.2 -2.9 15.8 3.5

      Of which: fixed

16.4 23.8 5.0 15.1 3.7

    Net exports 1/

-1.5 -9.4 1.5 -3.4 2.6

  Consumer prices


    End of period

12.1 13.3 10.1 9.9 57.2


8.4 14.8 13.0 7.7 38.0

Monetary accounts


Rubel broad money

35.0 22.5 0.9 27.4 60.0

Growth of credit to the economy at constant exchange rates

48.5 50.0 27.9 38.1 44.9
  (Percent of GDP)

External debt and balance of payments


Current account

-6.7 -8.6 -13.0 -15.5 -14.7

Trade balance

-8.9 -10.3 -14.1 -16.7 -11.8

  Exports of goods

53.8 54.0 43.4 46.3 72.9

  Imports of goods

-62.7 -64.3 -57.5 -63.0 -84.7

Gross external debt

26.5 25.0 44.8 52.1 68.3

  Public 2/

6.5 6.8 18.1 22.1 35.6

  Private (mostly state-owned-enterprises)

20.0 18.1 26.7 30.0 32.7

Savings and investment


Gross domestic investment

34.1 37.6 37.3 40.6 38.4

National saving

27.4 29.0 24.3 25.1 23.7

Public sector finance


General government balance

0.4 1.3 -0.7 -1.8 -1.5

Augmented general government balance

0.4 -3.5 -0.7 -4.3 -3.3


49.5 50.6 45.7 42.0 38.5

  Expenditure 3/

49.0 54.1 46.4 46.3 41.8

  Of which:



8.0 6.6 6.7 7.1 7.0

    Subsidies and transfers

10.5 11.5 11.7 8.4 8.9


8.5 10.0 8.1 8.4 5.3

Gross public debt

11.4 13.4 21.7 26.5 46.0
  (Annual percentage change, unless indicated otherwise)

Memorandum items:


Nominal GDP (billions of U.S. dollars)

45.3 60.8 49.2 54.7

Nominal GDP (trillions of rubels)

97.2 129.8 137.4 163.0 242.0

Terms of trade

-2.6 8.7 -9.3 0.2 5.2

Real effective exchange rate

-3.9 1.6 -4.6 -5.0 -14.8

Official reserves (billions of U.S. dollars)

4.2 3.1 5.7 5.0 6.5

  Months of imports of goods and services

1.2 1.2 1.8 1.2 1.4

  Percent of short-term debt

56.8 40.4 63.2 41.7 50.1

Financing gap (billions of U.S. dollars)


Sources: Belarusian authorities; and IMF staff estimates.

1/ Contribution to growth.

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

3/ Refers to the augmented expenditure of the general government.

1 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 stability. There is a presumption that members whose credit outstanding exceeds 200 percent of quota would engage in Post-Program Monitoring.


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