IMF Executive Board Concludes Third Post-Program Monitoring with Belarus

Public Information Notice (PIN) No. 12/144
December 19, 2012

Public Information Notices (PINs) form part of the IMF's efforts to promote transparency of the IMF's views and analysis of economic developments and policies. With the consent of the country (or countries) concerned, PINs are issued after Executive Board discussions of Article IV consultations with member countries, of its surveillance of developments at the regional level, of post-program monitoring, and of ex post assessments of member countries with longer-term program engagements. PINs are also issued after Executive Board discussions of general policy matters, unless otherwise decided by the Executive Board in a particular case.

On December 14, 2012, the Executive Board of the International Monetary Fund (IMF) concluded the Third Post-Program Monitoring Discussion with Belarus.1


Following last year’s severe balance of payments crisis, the economy stabilized in the first half of 2012. This reflected the authorities’ tightening of economic policies in late 2011 that was successful in reducing inflation and stabilizing the foreign exchange market. Growth in the first three quarters of the year was 2.5 percent and inflation fell sharply from over 100 percent at the end of 2011 to an annualized monthly inflation rate of about 20 percent in recent months. Official reserves strengthened to a level covering 2 months of imports.

However, under the favorable conditions in the first half of the year monetary policy was relaxed swiftly despite lingering expectations of high inflation and real wages were raised much faster than productivity. Broadly coinciding with a sharp deterioration in the balance of payments from the late summer, these policies have been contributing to returning signs of price and exchange rate pressures.

The authorities have indicated their resolve to lower inflation to 12 percent in 2013, improve the balance of payments, and strengthen reserves. However, they have also announced an 8.5 percent GDP growth target for in 2013, which would be incompatible with these objectives.

Progress on much-needed structural reform has been slow and uneven. Proposals to give the new Development Bank an expansionary mandate could further weaken control over Lending under Government Programs. Privatization is not moving forward and the 2011 expansion of the list of socially important goods subject to price controls remains in place.

Executive Board Assessment

Executive Directors welcomed the macroeconomic stabilization achieved after last year’s crisis, but expressed concern that the recent policy loosening may undermine progress thus far. Policy rates have been lowered too quickly and wage increases have outpaced productivity gains, reigniting price and exchange rate pressures. More broadly, Directors cautioned that the authorities’ pursuit of excessively ambitious growth targets could weaken the balance of payments, fuel inflation, and jeopardize debt sustainability.

Directors emphasized that, to safeguard macroeconomic stability and ensure sustainable growth, monetary, fiscal, and wage policies must be formulated in a consistent policy framework and structural reforms implemented on a broad front. In the face of rising downside risks, Directors encouraged the central bank to tighten the monetary stance and liquidity conditions expeditiously. To prevent external imbalances and further buffer against shocks, Directors agreed that the flexible exchange rate policy should be maintained and that reserves should continue to be rebuilt.

Directors took note of the authorities’ pursuit of balanced budgets in 2012 and 2013. However, they stressed that the appropriate fiscal stance also calls for restraint on quasi-fiscal operations, and that public sector wage increases in 2013 should be limited to the authorities’ target inflation rate. They welcomed the planned reduction of lending under government programs (LGP) funded from government deposits, but stressed that other forms of LGP also should be cut to curb overheating and the buildup of contingent liabilities.

Directors took the view that the recently established Development Bank should take charge of all government directed lending, thus allowing commercial banks to operate on market terms and improve credit allocation in the economy. The Development Bank would also need to be transparently funded from the budget and prevented from issuing its own debt.

Directors stressed that deep structural reform remains essential to raise productivity, enhance competitiveness, and boost potential growth. They regarded price liberalization, enterprise reform, and privatization as priorities, and urged faster progress in these areas. To protect the vulnerable, targeted social safety nets should be established.

Directors took note of Belarus’ interest in a possible new arrangement with the Fund. They agreed that such an arrangement would need to be conditional on a strong commitment of the authorities to a comprehensive and coherent package of policies and structural reforms.

Belarus: Selected Economic Indicators, 2008–12
  2008 2009 2010 2011 2012
        Prel. Proj.

National accounts


Real GDP

10.2 0.2 7.7 5.3 3.4

Total domestic demand

17.8 -1.1 11.5 2.9 0.6


12.5 0.0 7.9 2.9 4.4


16.4 0.0 9.3 3.5 4.5


0.3 -0.1 3.1 1.0 4.0


28.2 -2.9 18.4 3.0 -6.1

Of which: fixed

23.8 5.0 17.5 11.1 -5.9

Net exports 1/

-9.0 1.4 -3.7 3.8 2.8

Consumer prices


End of period

13.3 10.1 9.9 108.7 24.6


14.8 13.0 7.7 53.2 59.7

Monetary accounts


Rubel broad money

22.5 0.9 27.4 64.1 44.5

Growth of credit to the economy at constant exchange rates

39.0 17.6 23.7 29.2 35.4

External debt and balance of payments


Current account

-8.2 -12.6 -15.0 -10.5 -4.3

Trade balance

-10.3 -14.1 -16.4 -6.7 0.2

Exports of goods

54.0 43.4 46.0 75.1 81.2

Imports of goods

-64.3 -57.5 -62.4 -81.8 -80.9

Gross external debt

25.0 45.6 52.1 62.5 64.1

Public 2/

6.8 18.9 22.6 27.0 29.1

Private (mostly state-owned-enterprises)

18.1 26.7 29.5 35.5 35.1

Savings and investment


Gross domestic investment

37.6 37.3 41.2 36.3 32.1

National saving

29.4 24.7 26.2 25.8 27.8

Public sector finance


General government balance

1.3 -0.7 -1.8 3.0 0.0

Augmented general government balance 3/

-3.5 -0.7 -4.3 -3.1 -1.8


50.6 45.7 41.6 42.0 44.9

Expenditure 3/

54.1 46.4 45.9 45.1 46.7

Of which:



6.6 6.7 7.0 6.8 7.7

Subsidies and transfers

11.5 11.7 8.3 7.9 8.4


10.0 8.1 8.3 5.5 6.7

Gross public debt

21.7 34.9 42.0 49.8 45.2

Memorandum items:


Nominal GDP (billions of U.S. dollars)

60.8 49.2 55.2 55.1

Nominal GDP (trillions of rubels)

129.8 137.4 164.5 274.3 479.9

Terms of trade

8.8 -10.3 0.5 9.2 5.7

Real effective exchange rate

1.6 -4.5 -5.0 -17.8 3.8

Official reserves (billions of U.S. dollars)

3.1 5.7 5.0 7.9 7.9

Months of imports of goods and services

1.2 1.8 1.2 1.9 1.9

Percent of short-term debt

40.4 63.2 42.1 56.9 52.5

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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