IMF Approves $700 Million for Belarus After Review

By Michael Heath

Oct. 22 (Bloomberg) -- The International Monetary Fund approved a $700 million loan payment for Belarus and praised the former Soviet republic for policy steps including its currency devaluation and tighter fiscal and monetary policy.

Belarus, a conduit for a fifth of Russian gas exports to Europe, has received $2.23 billion under its bailout program, the IMF said in a statement late yesterday. The Washington-based fund has agreed to lend the nation about $3.6 billion.

"Exchange-rate adjustment has helped reduce external vulnerabilities, with the present regime providing a buffer against external shocks," IMF Deputy Managing Director Takatoshi Kato said in the statement. "The adjustment has been supported by a tight fiscal policy, with revenue shortfalls offset by spending cuts, and by an interest-rate policy that has kept market rates high in real terms."

The IMF, which has handed out more than $65 billion to eastern European nations to fight the financial crisis and subsequent economic recessions, in August urged Belarus to sell assets, curb lending and raise utility prices to cope with the first contraction in output in more than a decade.

Important Progress

"The authorities have made important progress in their structural reform agenda aimed at improving the business climate and facilitating private sector development," Kato said. "Privatization will play an important part in easing external financing constraints and promoting technological development."

Belarus devalued its ruble in January, pegging it to a basket of dollars, euros and Russian rubles. The central bank in June widened its exchange-rate band to 10 percent of its target basket to make the currency more flexible. The following month, it banned issuing retail loans denominated in foreign currencies to shore up the ruble and curb risks to bank assets as the economic slump erodes borrowers' ability to repay debt.

"The strategy of expanding credit under various government programs, while helping to cushion the impact of the crisis on output, put pressure on the external position," Kato said. "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 country's reserves, calculated using IMF methodology, were $3.88 billion as of September, according to the central bank. The stockpile has fallen from a record $4.75 billion reached on April 1, 2008.


Belarus' trade deficit widened more than 77 percent in the first half of the year to $3.95 billion from a $2.23 billion shortfall in the same period in 2008, according the National Statistics Committee. Exports to Russia, the country's main trading partner, plummeted to $2.96 billion from $5.57 billion in the first six months of last year.

The government has "progressed well on financial sector reforms, including bringing loan classification and provisioning requirements in line with international practice and improving the framework for crisis preparedness," Kato said.

"The commitments to disengage the central bank from non- core business and to enhance its independence are welcome," he added. "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."

To contact the reporter on this story: Michael Heath in Sydney at



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