Republic of Belarus: Fifth Post-Program Monitoring Discussions

KEY ISSUESContext: The current account is worsening, coinciding with peak debt service, limitedmarket access, and low reserves. Although the authorities have taken ad hoc measuresto curb acute exchange rate pressures during the summer, a stronger policy responseis urgently needed to reduce external imbalances and mitigate risks.Challenges: Facilitating external adjustment through a consistent set of policies is thekey short-term priority. The medium-term challenge remains to increase efficiency andcompetitiveness through deep structural reform, with strong measures taken up frontto enhance credibility.Policy recommendations:No further wage increases in 2013–14, to curb demand and regain competitiveness;Sharply reduce directed lending, to limit credit growth and contingent liabilities,and reduce external imbalances;Substantially scale back foreign exchange market intervention and tightenmonetary policy to facilitate exchange rate and balance of payments adjustment;Adopt comprehensive and ambitious structural reforms to raise sustainable growth