Press Release: IMF Approves Second STF Drawing for the Republic of Belarus

IMF News, January 31, 1995

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The IMF approved a second drawing under the systemic transformation facility (STF) for the Republic of Belarus equivalent to SDR 70.1 million (about US$103 million) to support the Government's 1995 economic reform program.
The first disbursement under the STF was SDR 70.1 million, approved on July 28, 1993 (Press Release No. 93/31).
The Republic of Belarus joined the IMF on July 10, 1992; its quota is SDR 280.4 million (about US$ 413 million), and its outstanding use of IMF credit currently totals SDR 70.1 million (about US$ 103 million).

Since independence, Belarus adopted a cautious approach to economic reform that did not maintain economic activity, standards of living, or price stability.
Progress of reforms since the first STF drawing was slow, though many elements of a comprehensive reform program were approved by Parliament in October 1994.
Real GDP contracted by 21.5 percent in 1994.
Industrial production in the last quarter of 1994 is reported to have been at about the level of a year earlier.
Monthly consumer price inflation was 31.3 percent in December 1994, reflecting excessive credit expansion.
Overall budgetary performance in 1994 was significantly better than expected due to higher revenues and savings in outlays driven by lack of external financing.
The 1994 external current account deficit widened to 11.6 percent of GDP as prices for energy imports moved towards international levels.

Main objectives:
- Stabilize the economy by reducing the monthly rate of inflation to 1 percent by year-end.
- Narrow the external current account to 5.7 percent of GDP.
- Make decisive steps towards creating a market economy.
Fiscal policy:
- Limit the fiscal deficit to about 3 percent of GDP.
- Limit domestic financing of the deficit to no more than 2 percent of GDP.
Monetary policy:
- Pursue a tight monetary policy by limiting the expansion in base money and bank credit.
- Maintain positive real interest rates.
Note: Although the program was designed to meet the requirements for a stand-by credit, consideration of a request for a stand-by has been delayed by a lack of external financing.

Price liberalization and adjustment of remaining administered prices for utility services:
- Food prices to reflect market forces.
- Domestic energy prices to reflect their full import costs.
Removal of remaining impediments to full unification of the foreign exchange market and lifting of barriers to exports.
Credit allocation to be made increasingly on market terms.
Acceleration of privatization, focusing on both small and large state enterprises.

The Government intends to continue financing an adequate social safety net to shield vulnerable groups of the population against the impact of price liberalization.

If fully implemented, the program should contribute decisively to stabilizing the Belarussian economy and reforming it along market lines.
A substantial curtailment in external financing could seriously jeopardize the program's objectives and excessively delay tangible improvements in the Belarussian economy.

Real GDP (percent change):
- 1993: –9.5
- 1994: –21.5
- 1995*: –7.0
Monthly consumer price inflation (end of period):
- 1993: 46
- 1994: 31
- 1995*: 1
External current account balance (deficit –) (percent of GDP):
- 1993: –7.2
- 1994: –11.6
- 1995*: –5.7
Fiscal balance (deficit –) (percent of GDP):
- 1993: –8.3
- 1994: –1.5
- 1995*: –3.2
Sources: Belarussian authorities; and IMF staff estimates.
*Program

International Monetary Fund — Press Release No. 95/9 (January 31, 1995).