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IMF approves final stand-by loan tranche for Belarus

The Executive Board of the International Monetary Fund (IMF) on March 26 completed the fourth, final review of Belarus’ performance under an economic program supported by its Stand-By Arrangement with the Fund, enabling the immediate disbursement of about $662.9 million to the country.

The final tranche under the program brings the IMF's total disbursements to an amount equivalent to about $3.44 billion.

Following the Executive Board's discussion on Belarus, Naoyuki Shinohara, deputy managing director and acting chair, said: “Belarus has made good progress in recovering from the economic crisis and performance under the Stand-By Arrangement has remained satisfactory. Output has stabilized, inflation is declining, and reserves have increased. However, the current account deficit increased in 2009 and public and external debt levels rose markedly, underscoring continued external vulnerability.”

Commenting on Belarus’ response to the latest oil import price shock, he said that “the increase in domestic prices of oil products and reduction of output by the oil refineries will reduce the need for subsidies.”

“These measures, together with strong revenue, exchange rate, and credit policy measures already taken, are expected to offset a large part of the balance of payments and fiscal impacts of the oil price shock,” he said.

Mr. Shinohara described the country’s macroeconomic policies as generally appropriate.

“The decision to cut lending under government programs and reaffirmation of the binding nature of the lending limit will make more financial resources available to private business, creating conditions for gradually reducing market interest rates,” he said. “The recentering of the exchange rate band at end-2009 and the depreciation of the rubel against the currency basket have supported external adjustment.”

He also hailed the financial sector reform, saying that it had made “important headway.”

The establishment of a special financial agency will relieve the commercial banks from the obligation to provide loans for government programs, he said.

But he emphasized the need to step up efforts in “other structural reform areas, including privatization, measures to attract foreign capital and reducing government intervention in the economy.”

“In addition to pursuing prudent macroeconomic and financial policies to reduce external vulnerability, structural reforms aimed at improving productivity will be essential for Belarus to restore high and sustainable growth rates,” Mr. Shinohara said. “The Fund, in collaboration with the World Bank and other international financial institutions, stands ready to support Belarus with its reform efforts”

In late 2008, the IMF agreed to lend Belarus $2.46 billion that Belarus requested 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 in January 2009 and said that “the remainder will be phased thereafter, subject to quarterly reviews.”

The IMF Executive Board in June 2009 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.

It approved the third loan tranche in the amount of $699.5 million in October and the fourth tranche in the amount of $688 million in December.

On January 27, National Bank head Pyotr Prakapovich said that Belarus needs additional external financing because Russian crude oil supplied to the country is to be subject to high export duty, which was not predicted.