Press Release: IMF Executive Board Completes First Review Under Stand-By Arrangement with Belarus, Approves US$679.2 Million Disbursement, and Increases Financial Support to US$3.52 Billion
IMF News, June 29, 2009
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- Press Release: IMF Executive Board Completes First Review Under Stand-By Arrangement with Belarus, Approves US$679.2 Million Disbursement, and Increases Financial Support to US$3.52 Billion
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- Published: June 29, 2009
Executive Board decisions and financing
- Completed the first review of Belarus’s performance under a Stand-By Arrangement (SBA).
- Increased financial support to SDR 2.27 billion (about US$3.52 billion), equivalent to 587 percent of Belarus’s quota or 7 percent of its GDP.
- Approved disbursement of SDR 437.93 million (about US$679.2 million).
- Total disbursements under the program so far: SDR 955.73 million (about US$1.48 billion).
- Granted a waiver of nonobservance of end-March performance criterion on net international reserves.
- Approved a modification of the end-June performance criteria.
- Notes that the original 15-month SDR 1.62 billion (about US$2.51 billion) SBA was approved on January 12, 2009 (Press Release No. 09/05).
Economic context and program rationale
- Purpose of the revised arrangement: support the government's economic program and help Belarus contain the effects of a greater than expected impact from the global financial crisis.
- Stated drivers of the shock: a fall in external demand and volatile cross-currency movements since the program’s approval in January.
- The strengthened adjustment strategy seeks to balance additional policy adjustment with enhanced IMF financial support to close the financing gap during the program period.
Policy measures and conditionality under the revised program
- Fiscal policy:
- Authorities will maintain a balanced budget in 2009 despite lower revenues.
- Plan to postpone public sector wage increases.
- Planned increase in targeted social assistance to the most vulnerable households.
- Monetary and exchange rate policy:
- Keep monetary policy adequately tight.
- Authorities have depreciated the rubel and widened the exchange rate band to ±10 percent around the parity rate.
- Tightened monetary policy through increases in policy interest rates and recommendations to commercial banks to increase interest rates on rubel term household deposits.
- Emphasis on maintaining tight monetary policy and resisting excessive increases in credit to the economy.
- Structural reforms:
- Deepen structural reforms, including stepped up efforts toward liberalizing the economy and preparing for privatization.
- Concrete steps: enactment of a privatization law that conforms to best practices, and establishment of a privatization agency capable of advancing an ambitious privatization agenda.
- Other structural measures: legislative changes to increase the central bank’s independence; plans to reduce further price and wage controls; remove mandatory production and employment targets for private companies.
- Intended outcomes: improve governance, the business climate, long-run growth prospects, and external stability.
Key statements from IMF management
- Mr. Takatoshi Kato, Deputy Managing Director and Acting Chair, stated:
- Belarus’s economy was hit hard by a fall in external demand and volatile cross-currency movements since the program was approved in January.
- The revised program:
- Responds to these developments by strengthening the adjustment strategy.
- Strikes a balance between additional policy adjustment, using all policy instruments available, and enhanced IMF financial support to close the financing gap.
- Includes stepped up efforts toward liberalizing the economy and preparing for privatization to bolster growth prospects over the medium term.
- On exchange rate and monetary measures:
- Depreciation of the rubel and widening of the exchange rate band should help improve the current account, allow greater exchange rate flexibility, and alleviate pressure on international reserves.
- Tightened monetary policy and higher rubel deposit rates should increase the attractiveness of holding rubel deposits, instill confidence in the currency, and help build central bank credibility.
- On fiscal and social measures:
- Maintaining a balanced general government budget in 2009 despite lower projected revenue is commendable.
- The planned increase in targeted social assistance will help those most severely affected by the crisis.
- On structural reform importance:
- Stronger efforts to liberalize the economy and prepare for privatization are essential to improve prospects for long-run growth and external stability.
Press Release No. 09/241, June 29, 2009.