BELARUS NEWS AND ANALYSIS

DATE:

28/08/2009

IMF Urges Belarus To Tighten Credit To Boost Reserves

WASHINGTON (Dow Jones)--Belarus authorities should tighten credit conditions to restore reserves and protect the country against additional external shocks, the International Monetary Fund said Thursday.

Following a mission to the former Soviet republic, which has obtained a $3.52 billion loan, the fund said government-supported lending should be curtailed to avoid exacerbating a balance-of-payment problem.

"To improve the external current account balance and preserve reserves, the authorities need to maintain a tight macroeconomic policy stance and contain domestic demand," the IMF said in a statement.

While the central bank has already raised interest rates, the IMF called for "strict limits" on government lending programs.

The fund has forecast a 3% contraction for the Belarussian economy this year, followed by growth of 2.5% in 2010. Amid a drop in exports, the current account gap is projected to approach 10% of gross domestic product this year and remain above 5% in the medium term.

In June, the IMF approved an increase of more than $1 billion in a 15-month standby arrangement granted in January to help close a substantial financing gap. Belarus policymakers agreed to a number of steps, including allowing the ruble to depreciate within the exchange-rate band, tightening monetary policy and stepping up structural reforms while maintaining sound fiscal policies.

The IMF mission said Belarus had made progress in these efforts, including widening the currency band and remaining committed to a balanced budget for 2009. It urged the government to defer a public wage increase and keep local government deficits under control.

While the exchange-rate policy and level is seen as appropriate, the IMF said the country should eventually move toward a more flexible system once the institutional framework is in place.

Source:

http://online.wsj.com/article/BT-CO-20090827-716474.html

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