IMF Completes Third Review Under Stand-By Arrangement with Belarus, Approves US$688 mln Disbursement

The FINANCIAL -- The Executive Board of the International Monetary Fund (IMF) on December 18 completed the third review of Belarus's performance under an economic program supported under a Stand-By Arrangement (SBA).

The 15-month, SDR 1.62 billion (about US$2.46 billion) SBA was approved on January 12, 2009 and on June 29, 2009 the size of financial package provided under the SBA was increased to an amount equivalent to SDR 2.27 billion (about US$3.63 billion).

The completion of the third review enables the immediate disbursement of SDR 437.93 million (about US$688 million), bringing total disbursements under the program so far to an amount equivalent to about SDR 1.83 billion (about US$2.88 billion).

The Executive Board approved modification of the performance criteria on international reserves and net domestic assets for end-December 2009 and structural benchmarks for the remainder of the program. The Staff Report and the Letter of Intent for the third review will be released after the authorities' review, while the papers for the second review, which was completed on October 21, will be released shortly.

Following the Executive Board's discussion on Belarus, Mr. Takatoshi Kato, Deputy Managing Director and Acting Chair, stated:

"Performance under Belarus's Stand-By Arrangement has been strong, and the economy is beginning to emerge from the crisis. Export volumes have stabilized, the exchange rate depreciation has improved competitiveness, and confidence appears to be growing among households. At the same time, Belarus remains vulnerable to external shocks, requiring continued prudent macroeconomic policies as well as flexibility in the face of uncertainties. In this regard, the authorities' commitment to take difficult measures to compensate for shortfalls and delays in external financing is commendable.

"It is important to solidify gains in external and domestic stability in the course of 2010. Aiming for an unrealistically high growth rate would increase pressure on the current account and increase Belarus's vulnerability to external shocks. It is therefore important that the authorities base policies on realistic assumptions and agreed program objectives.

"A key element of the 2010 macroeconomic framework is a prudent credit policy. The authorities' decision to limit lending under government programs is welcome. Establishing a special agency that would clean up banks' balance sheets and eventually replace banks in financing government programs will be an important step forward. The establishment of this agency will also allow the National Bank of the Republic of Belarus to terminate bank refinancing on non-market terms. Success in containing credit under government programs should make it possible to gradually ease interest rates in the credit market.

"The authorities' continuing commitment to pursue a prudent budget policy is an important building block in achieving program objectives. The 2010 budget will add little to public debt and will free up resources for the private sector. The authorities' plans to improve targeted social assistance, mitigating the effects of the crisis on the poor, are welcome.

"Advances in structural reform will be key to achieving high and sustainable growth. The authorities have already made progress in developing legal and institutional frameworks for privatization and in easing administrative controls. Further decisive progress in liberalizing the economy and increasing productivity will remain a priority to be sustained over the medium term.

"Continuation of the close collaboration with the Fund is welcome. The Fund stands ready for continued advice and support on macroeconomic and structural issues. Belarus would also benefit from a closer relationship with the World Bank and other international financial institutions," Mr. Kato said.


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