The Executive Board of the International Monetary Fund (IMF) on June 29 completed the first review of Belarus’ performance under a program supported by a Stand-By Arrangement (SBA) and increased the financial support to about $3.52 billion, more than $1 billion more than it had initially committed to the country.
The decisions enable the disbursement of about $679.2 million, bringing total disbursements under the program so far to $1.48 billion. The Board also granted a waiver of nonobservance of end-March performance criterion on net international reserves and approved a modification of the end-June performance criteria. The original 15-month $2.51 SBA was approved on January 12, 2009.
The revised arrangement will support the government`s economic program and help Belarus contain the effects of a greater than expected impact of the global financial crisis, the IMF said in a statement. To reduce the resulting financing gap, the authorities will maintain a balanced budget in 2009, despite lower revenues; keep monetary policy adequately tight; allow more exchange rate flexibility within a fluctuation band which is now plus/minus 10 percent around the parity rate; and deepen structural reforms, the Fund said.
"The revised program envisages stronger efforts to liberalize the economy and prepare for privatization, which are essential to improve prospects for long-run growth and external stability,"Takatoshi Kato, the IMF’s deputy managing director and acting chair, said following the Board’s discussion on Belarus. Among "concrete steps," Mr. Kato cited the enactment of a privatization law and the establishment of a privatization agency capable of advancing an ambitious privatization agenda.
"Other structural measures under the program, including legislative changes to increase the central bank’s independence and plans to reduce further price and wage controls and remove mandatory production and employment targets for private companies, will improve governance and the business climate," Mr. Kato said.
"Belarus’ economy has been hit hard by a fall in external demand and volatile cross-currency movements since the program was approved in January," he noted. "The strengthened adjustment strategy under the revised program responds to these developments." Mr. Kato welcomed the Belarusian authorities’ moves to depreciate the rubel, widen the exchange rate band and tighten monetary policy through increases in policy interest rates.
"The authorities’ decision to continue to pursue a balanced budget for the general government in 2009 despite lower projected revenue is commendable, as is the prudent plan to postpone public sector wage increases," Mr. Kato said. "The planned increase in targeted social assistance to the most vulnerable households will help those most severely affected by the crisis."
Belarus requested the loan from the IMF last October, 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."
