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IMF offers recommendations to Belarus following Article IV Consultation
Photo courtesy of B1.ro
MINSK, 18 January (BelTA) – The Executive Board of the International Monetary Fund has completed 2018 Article IV Consultation in Belarus and put forward policy recommendations on maintaining economic growth in the country, reads the IMF press release, BelTA has learned.
The press release reads that the cyclical recovery of the Belarusian economy continues, with growth in the first three quarters of 2018 reaching 3.7%. Higher oil prices and robust external demand have supported exports, while domestic demand got an impulse from wage growth. In turn, stronger imports, including related to the nuclear power plant construction, have led to some deterioration in the external accounts despite the positive terms of trade.
“Prudent monetary policy coupled with increasing central bank credibility are keeping inflation at historically low levels despite rapid wage growth. The exchange rate has remained relatively stable on a nominal effective basis, as have international reserves,” the press release reads.
The IMF experts believe that medium-term growth will stand at 2%. This outlook is conditional on full compensation from Russia for losses triggered by the so-called tax maneuver. “Should compensation be significantly less than full—and this is the key risk hovering over the Belarusian economy at this stage—medium-term growth could be materially lower than 2%”, the report reads.
Executive Directors welcomed Belarus’ continued economic recovery, supported by improved policy frameworks. However, Directors noted that rising public debt, high dollarization, and the uncertainty about Russia’s tax maneuver pose risks. They encouraged the authorities to use the current cyclical recovery to implement macroeconomic policies and reforms.
Directors agreed on the importance of continued central bank independence. They supported the authorities’ current monetary policy stance, which is consistent with the inflation target goal. Looking ahead, Directors welcomed continued progress towards inflation targeting. In this context, they commended the authorities for the liberalization of the FX market and for reductions in directed lending. It will be equally important to eliminate interest rate caps. Directors encouraged the authorities to continue to strengthen financial sector stability.
“Directors emphasized that advancing structural reforms is key to reducing macroeconomic vulnerabilities and raising growth potential,” the press release reads.
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.
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