IMF Executive Board Concludes Fifth Post-Program Monitoring Discussions with Belarus

Press Release No. 13/518
December 17, 2013

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.

Executive Board Assessment

Noting emerging threats to macroeconomic stability and the erosion in policy buffers, Executive Directors encouraged the authorities to adopt a strong policy response to mitigate these risks in an orderly manner. In particular, Directors concurred that a tightening of macroeconomic policies as well as deep structural reforms would be needed to restore internal and external balance, and lift medium-term growth prospects.

Directors considered it essential that wage increases are halted through 2014, and that directed lending is sharply reduced, with a full phase out over the medium term. In the meantime, remaining directed lending should be channeled through the Development Bank to foster the operation of state banks on commercial terms and promote better credit allocation. Directors agreed that a balanced budget is an appropriate fiscal target for next year, although a surplus should be targeted instead if insufficient progress is made towards the elimination of directed lending.

Directors concurred that scaling back interventions in the foreign exchange market would help narrow external imbalances and safeguard official reserves. They added that a tighter monetary stance would help contain inflationary pressures and prevent exchange rate overshooting. Furthermore, a shift to a policy framework centered on targeting base money could bolster policy credibility and help pave the way for the adoption of an inflation targeting regime over the medium term.

Directors welcomed recent steps to contain foreign currency lending by banks, but called for continued close monitoring of developments in this area. They recommended heightened vigilance over new deposit instruments that expose banks to exchange rate risks.

Directors underscored that deeper structural reforms are key to sustained non-inflationary growth. Accordingly, they welcomed the adoption of the authorities’ Joint Action Plan and encouraged its timely implementation. Nonetheless, Directors emphasized the need for a much more ambitious and frontloaded reform agenda, including comprehensive price liberalization, a detailed strategy and significant initial steps for reducing the role of the state in the economy, and a strengthening of social safety nets. Directors considered that support for a new Fund arrangement would depend on Belarus’ firm commitment to a comprehensive package of such reforms combined with strong macroeconomic policies.

Belarus: Selected Economic Indicators
  2009 2010 2011 2012 2013




National accounts


Real GDP

0.1 7.7 5.5 1.5 1.5

Total domestic demand

-1.7 11.5 3.4 3.7 5.8


0.0 7.9 1.0 8.2 7.0


0.0 9.3 2.3 10.8 9.4


-0.1 3.1 -3.6 -1.2 -3.0


-4.8 18.4 7.8 -3.7 3.5

Net exports 1/

1.4 -3.7 3.4 -1.8 -5.0

Consumer prices


End of period

10.1 9.9 108.7 21.8 14.5


13.0 7.7 53.2 59.2 19.1

Monetary accounts


Reserve money

-11.5 49.5 84.1 61.6 23.4

Rubel broad money

0.9 27.4 64.1 57.2 27.5

External debt and balance of payments


Current account

-12.6 -15.0 -8.5 -2.7 -9.4

Trade balance

-14.1 -16.4 -5.8 0.9 -5.8

Exports of goods

43.4 46.0 68.5 72.0 53.1

Imports of goods

-57.5 -62.4 -74.3 -71.2 -58.8

Gross external debt

45.6 52.1 57.7 54.5 51.2

Public 2/

18.9 22.6 25.0 23.3 21.3

Private (mostly state-owned-enterprises)

26.7 29.5 32.7 31.2 29.8

Savings and investment


Gross domestic investment

37.3 41.2 37.6 34.5 38.0

National saving

24.7 26.2 29.2 31.8 28.5

Public sector finance


General government balance

-0.7 -1.8 2.8 0.7 -0.5

Augmented general government balance 3/

-0.7 -4.3 -2.9 0.5 -0.8


45.8 41.6 38.8 40.8 38.7

Expenditure 3/

46.5 45.9 41.6 40.2 39.5

Of which:



6.7 7.0 6.3 6.6 6.8

Subsidies and transfers

11.7 8.3 7.3 7.7 8.2


8.1 8.3 5.1 6.5 5.0

Gross public debt

34.7 39.5 45.9 38.7 35.8

Memorandum items:


Nominal GDP (billions of U.S. dollars)

49.2 55.2 59.7 63.3

Nominal GDP (trillions of rubels)

137.4 164.5 297.2 527.4 670.1

Real effective exchange rate

-4.5 -5.0 -11.7 -8.2

Exchange rate (rubel /U.S. dollar, average)

2,793 2,979 4,975 8,337

Official reserves (billions of U.S. dollars)

5.7 5.0 7.9 8.1 5.7

Months of imports of goods and services

1.8 1.3 1.9 2.1 1.4

Percent of short-term debt

63.2 42.1 56.9 63.8 42.7






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/ The augmented balance adds to the balance of the general government outlays for banks recapitalizations and outlays related to called guarantees of publicly guaranteed debt. These outlays form the augmented expenditure of the 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 viability. There is a presumption that members whose credit outstanding exceeds 200 percent of quota would engage in Post-Program Monitoring.


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