Press Release: Statement at the Conclusion of the IMF Mission to the Republic of Belarus
November 16, 2010Press Release No. 10/439
November 16, 2010
An International Monetary Fund (IMF) team led by Mr. Christopher Jarvis visited Belarus during November 3-16 to hold Article IV consultations with the Belarusian authorities and other stakeholders.1 The team met with Prime Minister Sidorsky, Deputy Prime Minister Kobyakov, the Minister of Finance Mr. Kharkovetz, the Minister of Economy Mr. Snopkov, the Chairman of the Board of the National Bank of the Republic of Belarus Mr. Prokopovich, other senior officials, representatives of banks, an independent think tank, and the diplomatic community. The team expresses its appreciation to the authorities and other stakeholders for the frank and constructive discussions. At the conclusion of the mission Mr. Jarvis made the following statement today in Minsk:
“Belarus is recovering from the global economic crisis but there are still serious vulnerabilities. The first order of business should be to reduce the current account deficit.
“The authorities have achieved many things this year. Belarus avoided a recession and resumed economic growth which reached 6.8 percent year-on-year in January-October. Belarus gained access to international capital markets by issuing Eurobonds. Some progress has been made in structural reforms. The approval of amendments to the Privatization Law and the Decree on the National Investment and Privatization Agency strengthened legal and institutional frameworks for privatization. The authorities’ initiatives on further economic liberalization and the promotion of entrepreneurship focusing on the development of small and medium enterprises are also welcome.
“We remain concerned about the external vulnerability of the Belarusian economy. The current account deficit is high partly because of the oil price increase and also because of credit expansion, especially through lending under government programs. The recent government wage increase may add to these pressures, although we accept that to some extent it represents a catch up of government wages with those in the private sector.
“Looking ahead, the priority should be to bring the current account deficit down. This could be achieved through a combination of tighter fiscal policy, cutting net lending under government programs, keeping interest rates positive in real terms and more exchange rate flexibility.
“Structural reforms are critical. The mission believes that productivity-enhancing investment would improve the economy’s growth potential. We therefore recommended the authorities to shift the balance of investment in favor of machinery and equipment that have higher technology content and promote productivity, and away from housing construction which helps increase domestic demand but adds little to long-term growth. Furthermore, we hope that more progress will be achieved in privatization when the National Investment and Privatization Agency becomes operational. We also had a constructive dialogue about the prospects of creating a specialized financial agency (SFA) that would take over lending under government programs. We would like to see an SFA which would have clearly defined sources of financing for government programs and which would have a transparent and well-defined mechanism for allocating resources to these and also ensuring loan repayment.
“The IMF is prepared to work with Belarus under a new arrangement or regular consultations with the authorities on economic developments and policies. The IMF Executive Board discussion of the Article IV consultation for the Republic of Belarus will take place in early January 2011.”
1 Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members. A staff team visits the country (typically on an annual basis) to collect economic and financial information and discuss with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities.