Press Release: IMF Approves Stand-By Credit for the Republic of Belarus

IMF News, September 12, 1995

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IMF approved a 12-month stand-by credit for the Republic of Belarus equivalent to SDR 196.3 million (about $293 million) in support of the Government's economic program for 1995/96.
Since independence in 1992, Belarus undertook reforms to transform its economy from central planning to market mechanisms, with uneven progress.
Mid-1994 measures restored financial discipline and sharply reduced the burden of subsidies on the budget.
Achievements noted:
- tightening of budgetary expenditures in the second half of 1994 that allowed for a significant turnaround in the deficit of the general government;
- price liberalization; and
- strengthened market mechanisms for the allocation of credits by the National Bank of Belarus (NBB).
Ongoing challenges:
- continuous extension of credit to ailing sectors by the NBB hindered progress in reducing inflation;
- although inflation declined sharply during the second quarter of 1995, economic activity continued to contract with the decline of GDP estimated at 11 percent in the first half of the year;
- implementation of systemic reforms fell short of targets, especially privatization and enterprise reform.

Broad objectives: make further progress toward price stability, achieve a sustainable balance of payments position, and establish a market economy to lay the foundation for sustainable growth.
Explicit quantitative targets:
- limit the decline of GDP to 13.8 percent in 1995 and 3.0 percent in 1996;
- contain the rate of monthly inflation to to 1 percent by the end of 1995 and 0.5 percent by the end of 1996;
- reduce the external current account deficit to around 4 percent of GDP in 1995 and 1996;
- build up gross international reserves to the equivalent of 1.7 months of imports by the end of the program period.
Fiscal policy target:
- reduce the cash defecit of the general governement to 3.2 percent of the GDP for 1995 as a whole.
Fiscal measures to achieve targets:
- revenue side: increasing excises, limiting tax exemptions, adn strengthening the collection of taxes and social security contributions;
- expenditure side: containing subsidies and net lending as well as the wage bill and other discretionary outlays.
Monetary policy stance:
- aim at maintaining poisitve real interest rates and limiting the expansion in base money.

Government commitments include:
- further pursue price liberalization policy;
- deepen reforms of the foreign exchange market;
- take significant steps toward comprehensive liberalization of foreign exchange and external trade transactions.
Specific measures to be adopted:
- (i) further reduce barriers to private sector development;
- (ii) give a clear impetus to the corporatization and privatization process;
- (iii) encourage enterprises to become financially more responsible and to restructure;
- (iv) adopt legislation on private ownership of land.

Within budget targets, authorities will provide financing for a social safety net to partially compensate the most vulnerable groups for the impact of increases in tariffs for household services and utilities.

Full and sustained implementation requires that authorities:
- continue to resist pressures from various lobbies for more credit and subsidies;
- closely monitor the situation of banks;
- avoid any further deterioration in tax revenue; and
- implement effectively the program's systemic reforms.

Republic of Belarus membership and IMF position:
- Belarus became a member of the IMF on July 10, 1992;
- quota is SDR 280.4 million (about $418 million);
- outstanding use of IMF credit currently totals SDR 140.2 million (about $209 million).

Real GDP growth (percent change)
- 1993: –10.6
- 1994: –20.2
- 1995*: –13.8
- 1996*: –3.0
Consumer prices (percent change of period average)
- 1993: 1,118.0
- 1994: 2,220.0
- 1995*: 703.0
- 1996*: 32.0
External current account balance (deficit –) (in millions of US dollars)
- 1993: –338.0
- 1994: –545.0
- 1995*: –379.0
- 1996*: –412.0
Government budget balance (deficit –) (percent of GDP)
- 1993: –1.8
- 1994: –1.7
- 1995*: –3.2
- 1996*: –2.0
Sources: Belarussian authorities; and IMF staff estimates.
Note: *Program.

Press Release No. 95/46 — September 12, 1995