IMF Executive Board Concludes Article IV Consultation with the Republic of Belarus

Press Release No. 14/361
July 25, 2014

On July 16, 2014, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation1 with the Republic of Belarus.

Following average annual GDP growth of 8 percent during 1997–2008, in the aftermath of the 2008 and 2011 crises growth has slowed—reaching only 0.9 percent in 2013—reflecting structural limitations of the economy and a weak external environment. Meanwhile, Belarus’ external position has deteriorated sharply with the current account deficit reaching 10 percent of GDP in 2013. Inflation continues to be in double digits and the real exchange rate has appreciated rapidly.

Following a highly expansionary policy stance earlier, wage and credit policies have become more cautious from the second half of 2013. This helped stem immediate pressures in the fall. Since then, policies have been mostly on hold, with the notable exception of monetary policy, which is gradually being loosened. The first quarter of 2014 saw improvements in GDP growth and the trade balance, but this partly reflected seasonal and one-off factors.

The outlook is for continued slow growth and persistent external imbalances, but risks are high and tilted to the downside. With weak Russian growth weighing on external demand and with domestic demand slowing, only 0.9 percent GDP growth is expected this year, while inflation is forecast to remain around 16 percent. The current account deficit is projected at 8 percent of GDP in 2014 on weak external demand, low competitiveness, and a policy mix that continues to be too loose.

Executive Board Assessment2

Executive Directors noted the pressing challenges facing the Belarusian economy, including low economic growth, high inflation, and large external imbalances. With an adverse external environment further clouding the outlook, Directors urged the authorities to take decisive policy actions to facilitate adjustment, and to deepen structural reforms to eliminate constraints to higher and sustainable growth.

Directors welcomed the envisaged reduction of new directed and subsidized lending but saw a need for more ambitious cuts to help contain contingent liabilities. They welcomed the intention to let the Development Bank coordinate all directed lending starting in 2015 and underscored the importance of a comprehensive plan for phasing out such lending over the medium term and developing a banking sector that operates on a fully commercial basis.

Directors noted with concern the high wage growth in recent years. They emphasized the importance of keeping wage growth aligned with productivity improvement to avoid fueling inflation and regain competitiveness. They also recommended achieving fiscal adjustment through savings from wages and subsidy reductions, instead of further reducing capital expenditure.

Directors concurred on the need to scale back foreign exchange intervention to allow greater exchange rate flexibility needed to strengthen competitiveness, thus facilitating external adjustment and protecting reserves. At the same time, Directors agreed that monetary policy should be tightened to contain inflation and guard against exchange rate overshooting. In this context, moving to base money targeting would provide a policy anchor and improve the effectiveness of monetary policy.

Directors cautioned that recent increases in nonperforming loans and ongoing problems in a large bank require close supervision and adequate remedial measures. They highlighted the need for the central bank to ensure that all banks comply with capital adequacy norms and reserve requirements. The growth in foreign exchange lending should also be closely monitored.

Directors stressed that broad and deep structural reforms are essential to boost sustainable growth. They encouraged the authorities to build on the recent progress in price liberalization by stepping up reforms in other areas to improve resource allocation, including utility and transport tariff reform, reducing the role of the state in the economy, and strengthening social safety nets.

Belarus: Selected Economic Indicators, 2010–14

  2010 2011 2012 2013 2014

National accounts


Real GDP

7.7 5.5 1.7 0.9 0.9

Total domestic demand

11.5 3.4 2.6 8.9 1.4


7.9 1.0 8.2 9.2 1.7


9.3 2.3 10.7 12.1 2.0


3.1 -3.6 -1.0 -2.6 0.0


18.4 7.8 -6.6 8.4 0.8

Of which: fixed

17.5 13.9 -11.3 7.5 0.9

Net exports 1/

-3.7 3.4 -0.9 -7.6 -0.9

Consumer prices


End of period

9.9 108.7 21.8 16.5 16.3


7.7 53.2 59.2 18.3 16.8

Monetary accounts


Reserve money

49.5 84.1 61.6 13.4 27.8

Rubel broad money

27.4 64.1 57.2 16.4 28.4

External debt and balance of payments


Current account

-15.0 -8.5 -2.9 -10.1 -8.8

Trade balance

-16.4 -5.8 0.9 -6.3 -6.8

Exports of goods

46.0 68.5 71.6 51.0 43.9

Imports of goods

-62.4 -74.3 -70.8 -57.3 -50.7

Gross external debt

52.1 57.7 54.2 53.8 51.4

Public 2/

22.6 25.0 23.1 22.0 20.5

Private (mostly state-owned-enterprises)

29.5 32.7 31.0 31.8 31.0

Savings and investment


Gross domestic investment

41.2 37.6 35.4 38.7 38.1

National saving

26.2 29.2 32.5 28.6 29.3

Public sector finance


General government balance

-1.8 2.8 0.7 0.2 -0.5

Augmented general government balance 3/

-4.3 -2.9 0.5 -0.8 -3.3


41.6 38.8 40.5 42.0 41.8

Expenditure 3/

45.9 41.6 40.0 42.8 45.2

Gross public debt 4/

39.5 45.9 38.5 37.0 35.5

Memorandum items:


Nominal GDP (billions of U.S. dollars)

55.2 59.7 63.6 71.7

Nominal GDP (trillions of rubels)

164.5 297.2 530.4 636.8 826.2

Real effective exchange rate

-5.0 0.7 -8.2 7.5

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

2,979 4,975 8,337 8,880

Official reserves (billions of U.S. dollars)

5.0 7.9 8.1 6.7 3.6

Months of imports of goods and services

1.3 1.9 2.1 1.8 0.9

Percent of short-term debt

42.1 56.9 63.8 47.1 25.3

Sources: Belarusian authorities; and IMF staff estimates.
1/ Contribution to growth.
2/ Gross consolidated external 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.
4/ Gross consolidated debt of the public sector (central bank and general government debt including publicly guaranteed debt).

1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses 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.

2 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. An explanation of any qualifiers used in summings up can be found here:


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