IMF praises Belarus’ economic policy

Belarus has achieved much progress in carrying out reforms aimed at improving its business environment and developing the private sector, Takatoshi Kato, deputy managing director of the International Monetary Fund (IMF), said in a statement adopted on Wednesday following the second review of the country’s performance under an economic program supported by a stand-by arrangement with the IMF.

The IMF approved a $699.5-million loan tranche for Belarus on October 21.

According to Mr. Kato, "Belarus has made good progress in adjusting its policies in response to the global crisis." "Despite a substantial decline in exports, the economic contraction has been modest relative to other crisis-hit countries. Exchange rate adjustment has helped reduce external vulnerabilities, with the present exchange regime providing a buffer against external shocks," the statement said.

The IMF official criticized the government’s "strategy of expanding credit under various government programs," which he said helped cushion the impact of the crisis on output but "put pressure on the external position." "The authorities are committed to a tight credit policy, with a view to reducing the current account deficit and pressure on international reserves. The decision to limit lending under government programs in the remainder of 2009 will help contain domestic demand and support the stabilization efforts," the statement said.

"Privatization will play an important part in easing external financing constraints and promoting technological development. The planned setting-up of a Privatization Agency is on track. Reducing the burden of regulation and quantitative targets on the private sector, as well as increasing the commercial orientation of banks, will promote more efficient allocation of resources. It will be important to protect vulnerable groups and enhance the effectiveness of the social safety net," Mr. Kato said.

He also lauded the Belarusian government for "progressing well on financial sector reforms."

"Securing sufficient financial resources from the international community is essential for Belarus’ reform efforts. In this context, the authorities stand ready to implement contingency measures should a financing gap emerge," the statement concluded.

In late 2008, the IMF agreed to lend Belarus $2.46 billion. Belarus requested the loan in October 2008, saying that it was needed for replenishing the country’s gold and foreign exchange reserves amid the global financial crisis.
The international organization made available some $787.9 million for Belarus in January and said that "the remainder will be phased thereafter, subject to quarterly reviews."

The IMF Executive Board on June 29 increased the amount of the loan for Belarus to about $3.52 billion, and approved the disbursement of the second tranche, $679.2 million, to the country.

The National Bank of Belarus said in July that it hoped to receive $1,350 million more from the IMF by the end of this year.