Belarus is facing high economic risks that stem from both domestic and regional sources, the International Monetary Fund (IMF)’s staff team says in a report.
«The main domestic risk stems from the Presidential elections in the fall, which could prompt macroeconomic stimulus measures that would exacerbate inflation pressures and external imbalances,» says the staff report, prepared following consultations with Belarusian authorities this past March.
The IMF experts also express concern over a «deterioration of bank balance sheets on account of the sharp rubel depreciation and the weak economic environment.»
«Externally, financing shortfalls could deepen the recession or force a sharper exchange rate adjustment,» says the report. «Oil price developments and geopolitical tensions in the region, to the extent that they impact Russia, are also key sources of risks. A deeper-than-envisaged recession in Russia or further ruble depreciation would negatively impact the balance of payments and growth in Belarus. However, better-than-expected Russian growth, or ruble recovery, are upside risks.»
The experts note that more external financing could alleviate strains, but prospects are uncertain. «The financing outlook is clouded, including on account of spillovers from Russia, which is Belarus’ main source of interbank lending and foreign direct investment,» says the report. It refers to Moscow`s decision to allow Minsk to keep the entire revenues from export duties on petroleum products made from Russian crude oil this year.
«Further bilateral support could help ease conditions, but there are no concrete indications that more support is forthcoming,» say the IMF experts.
They warn that the high level of Eurobond spreads will likely prevent the Belarusian government from placing new bonds in international markets this year.
