Press Release No. 12/66

Press Release: Statement at the Conclusion of the IMF Mission to the Republic of Belarus

March 5, 2012

An International Monetary Fund (IMF) team led by Mr. Christopher Jarvis visited Belarus during February 22 to March 5, 2012 to hold Article IV consultations with the Belarusian authorities and other stakeholders.¹ The team met with Prime Minister Myasnikovich, the Chair of the Board of the National Bank of the Republic of Belarus Ms.Ermakova, Deputy Prime Minister Rumas, the Minister of Finance Mr. Kharkovetz, the Minister of Economy Mr. Snopkov, other senior officials, representatives of banks, an independent think tank, and the diplomatic community. The team expresses its appreciation to the authorities and other stakeholders for the frank and constructive discussions.

At the conclusion of the mission Mr. Jarvis made the following statement today in Minsk:

"The Government and the National Bank have made progress during the past few months on bringing down inflation and narrowing external imbalances. Much of their success is due to good policies. Since the exchange rate was unified in October people have been more confident that they can get foreign exchange. Positive real interest rates on rubel deposits have given people more confidence in the rubel. The Government and the National Bank have also adopted sound polices for 2012—a balanced budget, tight limits on lending under government programs, and firm control over credit.

"This is a good platform to build on, but there is still a lot of work to do. A consistent plan for the economy must be developed. We believe that a growth target of 5 percent for 2012 is not consistent with the continued need to bring down inflation further. We also think that it would be a mistake to increase wages significantly until stability is more firmly anchored. This year the first priority should be securing stability in the economy. This requires sticking to the approved budget and credit plans, wage restraint in the government sector and in the state-owned enterprises, and making sure that interest rates remain above people's expectations of inflation, so that they can be sure that the value of their savings will be preserved.

"The relative stability in the economy also gives the Government and the National Bank an opportunity to think about longer term goals. The Government should design a fiscal policy which will keep government debt at sustainable levels over the next several years. The National Bank should target low rates of inflation, with exchange rate flexibility, a combination of policies which will reduce the current account deficit further. The Government should also design structural reform policies with the aim of increasing productivity and growth. We recommend liberalizing prices, giving managers in state enterprises more autonomy, making it easier for labor to move from declining industries to expanding ones, and increasing the role of the private sector by reform of banks, enterprise privatization and measures which attract investment from both foreigners and Belarusian entrepreneurs. We also recommend increasing targeted social and unemployment benefits to provide more protection for vulnerable people, and paying for this by reducing more broad-based subsidies.

"What is the role of the IMF in these plans? The purpose of this mission has been to listen to the views of the authorities and of others: trade unions, think tanks, and businessmen; to offer advice; and explain economic development and policies in Belarus to the IMF's member countries. We will continue with these kind of missions at least every six months for the next couple of years. We also talked about Belarus's request for IMF financial support. Program negotiations would require an agreement among all policy makers, including at the highest level to adopt a comprehensive and consistent package focused on stability and to embark on the path of deep structural reform. We would also need to be confident that a new program would be supported by the IMF’s membership."

¹Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members. A staff team visits the country (typically on an annual basis) to collect economic and financial information and discuss 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. 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.