IMF Executive Board Concludes 2015 Article IV Consultation with the Republic of Belarus

19 May 2015

On May 13, 2015, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation1 with the Republic of Belarus.

Belarus continues to be highly vulnerable to economic shocks, as was illustrated by the turbulence in foreign exchange and debt markets late last year. Frequent bouts of expansionary macroeconomic policies, in a context of deep structural rigidities, have fueled inflation and external imbalances and left Belarus dependent on ad hoc external support.

Selective policy tightening and a Russian loan helped Belarus navigate large external imbalances during much of 2014. Yet the slide of the Russian ruble in the fourth quarter triggered acute exchange market pressures in Belarus, which eventually prompted a stepwise devaluation of the rubel by 30 percent against the dollar starting in late December. Meanwhile, real GDP grew by about 1½ percent in 2014, primarily driven by the recovery of potash exports, while inflation hovered around 18 percent.

In 2015, growth has slowed sharply as high uncertainty, reductions in real incomes, administrative measures, and declining trade with Russia weighed on activity. The inflationary impact of the exchange rate depreciation has been muted by a ban on price increases that was eventually lifted in April. The exchange rate has stabilized and bond spreads have narrowed, while macroeconomic policies have tightened further in a context of increasingly constrained external financing.

The outlook is for a recession and continued external pressures. With Russia—the largest trading partner—in a downturn, the Belarusian economy is projected to contract by 2¼ percent in 2015, led by falling exports. The current account deficit is expected to remain around 7 percent of GDP—contributing to significant financing needs. The devaluation is forecast to push inflation to 22 percent this year despite weak domestic demand. In the medium term, it is expected that financing constraints will force current account adjustment, while growth will remain weak reflecting structural rigidities.

Executive Board Assessment2

Noting Belarus’s continued high vulnerabilities and challenging near-term outlook, Executive Directors called for a decisive reorientation of policies to promote stability and a sustainable recovery. Macroeconomic policies should focus on reducing external imbalances and lowering inflation, while structural reforms are needed to raise the economy’s growth potential.

Directors welcomed last year’s reduction of directed lending growth. They emphasized that new lending should be further reduced this year and phased out over the medium term so as to improve credit allocation, contain contingent liabilities, and contribute to a reduction in domestic demand pressures. Directors also recommended retaining the savings from eliminated oil duties in 2015, which would result in a small surplus on the headline fiscal balance and help alleviate financing constraints.

Directors called for containing wage increases in 2015, following their excessive growth in recent years. They noted that wage restraint would help curb demand and consolidate the competitiveness gains from rubel depreciation. In the medium term, wage developments should closely follow productivity growth.

Directors welcomed the authorities’ intention to make the exchange rate more flexible, and called for further steps towards exchange rate flexibility to protect the already low reserves and ensure adequate adjustment in the volatile external environment. Directors also recommended that the National Bank of the Republic of Belarus (NBRB) fully implement a money-targeting framework that is focused on bringing down inflation to single digits.

Directors underscored the importance of closely monitoring risks in the banking sector, noting that a diagnostic study would help assess the impact of recent shocks on banks’ asset quality. Any detected problems should be addressed decisively, and any problem banks should be recapitalized or resolved as soon as feasible. Directors also stressed that the development bank should be appropriately supervised, and that the NBRB should divest as soon as possible Moscow-Minsk Bank in light of the conflict of interest arising from the bank being owned by its supervisor.

Directors agreed that deep structural reforms remain critical to enhance the role of the market in the economy, boost productivity and competitiveness, and promote sustainable growth. They urged the authorities to adopt and implement decisively an ambitious, well-sequenced reform agenda, which should include price liberalization, measures to bring utility and transport tariffs to full cost recovery, steps to phase out mandatory targets for enterprises, and privatizations in the corporate and banking sectors. While recognizing Belarus’s low levels of poverty and income inequality, Directors emphasized that social safety nets, including the unemployment insurance, should be strengthened to protect the most vulnerable.

Directors noted the authorities’ interest in a new Fund-supported program. Recognizing the benefits it could bring to the country, Directors underscored that any future arrangement would require a credible and strong commitment at the highest level to a comprehensive package of deep structural reforms and consistent macroeconomic policies. They looked forward to continued close engagement with the authorities on these issues.

2011 2012 2013 2014 2015
National accounts

Real GDP

5.5 1.7 1.0 1.6 -2.3

Total domestic demand

3.4 2.6 8.6 -0.7 -1.8


1.0 8.2 8.3 3.3 -0.6


2.3 10.7 10.8 4.4 -0.4


-3.6 -1.0 -2.1 -1.9 -1.3


7.8 -6.6 9.3 -8.4 -4.3

Of which: fixed

13.9 -11.3 9.6 -8.9 -4.5

Net exports 1/

3.4 -0.9 -6.6 1.1 -0.2

Consumer prices

End of period

108.7 21.8 16.5 16.2 22.0


53.2 59.2 18.3 18.1 22.1

Monetary accounts

Reserve money

84.1 61.6 13.4 13.8 19.4

Rubel broad money

64.1 58.4 15.5 14.5 28.5

External debt and balance of payments

Current account

-8.5 -2.9 -10.4 -6.7 -7.0

Trade balance

-5.8 0.9 -6.3 -3.4 -7.1

Exports of goods

68.5 71.6 50.0 46.9 46.4

Imports of goods

-74.3 -70.8 -56.3 -50.3 -53.5

Gross external debt

57.7 54.2 54.9 54.6 68.0

Public 2/

25.0 23.1 21.6 23.0 27.6

Private (mostly state-owned-enterprises)

32.7 31.0 33.3 31.7 40.4

Savings and investment

Gross domestic investment

37.6 35.4 38.2 33.5 32.7

National saving

29.2 32.5 27.9 26.8 25.8

Public sector finance

General government balance

2.8 0.7 0.1 1.1 0.6

Augmented general government balance 3/

-3.0 0.3 -0.9 0.4 -3.0


38.8 40.5 41.2 40.3 41.3

Expenditure 3/

41.8 40.2 42.1 39.9 44.3

Gross public debt 4/

45.9 38.5 37.6 39.8 41.3

Memorandum items:

Nominal GDP (billions of U.S. dollars)

59.7 63.6 73.1 76.1 ...

Nominal GDP (trillions of rubels)

297.2 530.4 649.1 778.5 972.5

Real effective exchange rate

-11.7 -8.2 8.0 9.8 ...

Exchange rate (rubel /U.S. dollar, average)

4,975 8,337 8,880 10,224 ...

Official reserves (billions of U.S. dollars)

7.9 8.1 6.7 5.1 2.5

Months of imports of goods and services

1.9 2.1 1.8 1.7 0.8

Percent of short-term debt

56.9 63.8 45.6 37.2 18.4

Sources: Belarusian authorities; and IMF staff estimates.

1/ Contribution to growth.
2/ Gross consolidated external debt of the public sector (central bank and general government debt including publicly guaranteed debt).
3/ The augmented balance adds to the balance of the general government outlays for banks recapitalizations and outlays related to called guarantees of publicly guaranteed debt. These outlays form the augmented expenditure of the government.
4/ Gross consolidated debt of the public sector (central bank and general government debt including publicly guaranteed debt).

1 Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

2 At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here: