Opinions & Interviews

MINSK, 19 December (BelTA) – The Executive Board of the International Monetary Fund (IMF) finished the latest round of Article IV consultations with Belarus on 13 December, BelTA has learned.

The IMF statement, which was released as a result of the consultations, reads: “The Belarusian economy is recovering after two years of recession, helped by better policies, a more favorable external environment, and stronger domestic demand conditions. In Q3 2017 the economy grew by 1.7% year-on-year, amid household consumption boosted by strong wage growth and recovering investment.”

According to the source, the current account deficit has narrowed, reflecting growth in services export as well as recession and real exchange rate adjustment in 2015-2016. This year’s energy and financing agreements with Russia and the successful eurobond issuance in the middle of the year have eased near-term financing pressures. Headline inflation slowed to 5.3% year-on-year in October 2017, helped by tighter control over monetary aggregates, imported disinflation, a negative output gap, and a slowdown in administered price hikes.

The IMF executive directors welcomed the improvement in macroeconomic and financial policies over the last 2.5 years. The directors recognized the fact that these policies had helped support the economic recovery along with a more favorable external environment. However, they emphasized that vulnerabilities remain high and further efforts are needed, including to address structural weaknesses. In this context, continued active engagement between the International Monetary Fund and the Belarusian government is important.

The IMF directors encouraged the Belarusian government to use the economic recovery to implement deeper, faster reforms in the real sector in order to increase productivity, fuel growth, and boost the economy’s resilience to shocks. The directors saw a critical need to reform the state-owned enterprise (SOE) sector. The directors also stressed the need to implement measures to improve labor and product markets. The directors noted that salary increases should be consistent with productivity growth.

According to the source, the IMF recommends continued fiscal consolidation over the medium term to ensure state debt sustainability. The Belarusian government is encouraged to adopt a tighter fiscal stance in 2018. Monetary policy should remain consistent with inflation objectives.