MOSCOW: Belarus would be well advised to devalue its currency to tackle unsustainable external deficits resulting from excessively loose economic policy, the International Monetary Fund said.
It is not too late, however, to stabilise the economy of the former Soviet state by cutting the budget deficit and hiking interest rates, IMF Belarus mission chief Chris Jarvis said.
“We do think a devaluation would be a good idea,” Jarvis said in a telephone interview late on Thursday. “That said, a devaluation is not the only way that Belarus could adjust. An alternative would be to impose tighter fiscal, monetary, credit and wage policy.”
Such a tightening would require the fiscal deficit to be reduced below the 3 percent of gross domestic product penciled into the 2011 budget.
Interest rates would, meanwhile, have to be hiked so they are “positive, and in the short term strongly positive, in real terms.” Belarus hiked rates by 200 basis points on March 11, to 12 percent, compared to inflation last year at 9.9 percent. “At the moment, the authorities still have a choice between those two policies. Time is getting short,” Jarvis said. The IMF completed a lending programme with Belarus early last year. Rapid wage and lending growth in 2010, when Alexander Lukashenko won a fourth term as president, has undermined the competitiveness of Belarus’s state-dominated economy. REUTERS
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