BELARUS DIGEST

The International Monetary Fund completed its review of Belarus’s economic policies and approved another financial aid package to Belarus. This time it amounts to US$688 Million.

The IMF noticed some improvements in the legal and institutional frameworks for privatization and in easing administrative controls. The IMF praised and encouraged Belarus’ prudent credit policy and reduction of public deficit.

It looks like a very peculiar combination: on the one hand, Belarus has the worst tax system in the world, but manages to run prudent credit policy to the IMF’s satisfaction.

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WASHINGTON – Having concluded another round of consultations with Belarus authorities, the International Monetary Fund urges the Government to sell state assets, curb lending and raise utility prices to cope with the most serious economic crises in more than a decade.

The IMF recommendations sharply contrast with the views of Sergey Tkachev, one of Belarus President’s most influential economic aides. In an interview given earlier this week, privatization of state property is described as a “craze” and the movement towards economic liberalization as shameful. (The full text of Tkachev’s interview as well as a compilation of its most controversial parts are available online in Russian.)

However, privatization and liberalization is exactly what the IMF expects from Minsk. Here is the Concluding Statement of the IMF Mission to Belarus:

Belarus is confronted with the urgent task of overcoming the current economic crisis and longer-term challenge of resuming rapid economic growth. To improve the external current account balance and preserve reserves, the authorities need to maintain a tight macroeconomic policy stance and contain domestic demand. The measures that are needed to achieve this will be an important subject for discussion during the mission’s continuing work on the second review of the SBA. The Article IV consultation discussions have focused on the longer-term issue of how Belarus can resume the growth performance of recent years. The mission believes that high and sustainable growth in future can be achieved with improvements in productivity and increased foreign direct investment. Economic liberalization and accelerated privatization efforts can produce these results. The exchange rate level and regime appear appropriate, but a move to a more flexible system would be warranted once a strong institutional framework is in place to support it.

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WASHINGTON – The economic situation in Belarus has worsened since the eastern European country signed a $2.46 billion loan agreement with the International Monetary Fund in January, the IMF said Tuesday.

“The fall in demand in major trading partners, including Russia, has hit Belarus’s exporters hard,” Chris Jarvis, the IMF’s Belarus mission chief, said in a statement following a weeklong visit to Minsk.

Additionally, “The devaluation of the ruble on January 2 and the peg to a basket of currencies have reduced Belarus’s vulnerability to the external shocks it is facing,” Jarvis said.

The IMF already has disbursed $800 million in loans to Belarus. The remainder is scheduled to be disbursed by early 2010.
“We believe that with the right policies Belarus can meet the challenges it faces,” Jarvis said.

IMF officials are scheduled to return to Belarus in late April or early May.

Source: Dow Jones Newswires (March 10, 2009)