Belarus and IMF Started to Discuss New Credit Program

13.06.2011 17:52
Архив Редакция

Belarus has started discussions of a new program with the IMF, the head of the IMF mission in Belarus, Chris Jarvis, announced on June 13. However, the representative of the fund noted that meanwhile it's too early talking about the possible levels of support, as "we have a long way to go, to further discuss macroeconomic policy in Belarus; it is necessary to agree on structural reforms" in order to ensure the efficiency of enterprises and financial system.

«We have not so far advanced to discuss the amount of this support,» he said, Korrespondent.net.

«One should agree on significant measures in the area of ​​structural reforms and macroeconomic policies prior to implementation of the program, so that the state could demonstrate its determination,» said the IMF representative. He said that the IMF would continue cooperating with the Government and the National Bank to come to agreement.

IMF Urges Belarus Authorities to Release Ruble Exchange Rate and Not to Raise Salaries

The IMF believes that the Belarusian government must abandon the wage increase and switch to a free fx rate fixing. «The government should reduce the budget deficit, enter the non-deficit budget and prevent wage increases this year,» said the head of the IMF mission to Belarus.

«We know that prices are rising, and it’s hard to exist in these conditions without the salary rise. But a significant increase in wages will lead to new price increases and a vicious circle,» he said.

Jarvis said there’s a serious economic crisis in Belarus. «We have recommended the state agencies to work out a clear plan to resolve the crisis together. The State must explain to people what and how it’s going to do,» said the head of the IMF mission.

Crisis Triggered by Sharp Increase in Wages and Lending, Jarvis

According to Chris Jarvis, the crisis is based on an excessive increase in lending, as well as in salaries up to the level the economy could not afford.

He believes that the National Bank should limit the monetary and credit issue, which is to reduce the volume of lending in the state programs and to raise interest rates above inflation. Thus, the population will be confident in their savings to be safe.

«Fx market is not working. Few people are willing to sell foreign currency at the official rate. We recommend to switch into the floating exchange rate regime. Thus, the exchange rate will be set by market forces,» said Chris Jarvis. In addition, the IMF believes that the price freeze in Belarus will lead to shortages.

«I do not think that price caps are a good idea. It will lead to a deficit,» said Jarvis. He also stressed that the IMF offers «a full liberalization of all segments of the fx market and the rate unification.»

The IMF mission head did not make any prediction about the level of Belarusian ruble exchange rate.

«The currency market is quite uncertain, particularly regarding the possible level of stabilized exchange rates. But we believe that in case of the floating fx rate regime, the fx rate will still stabilize and will be moving in a certain limited range after some initial period,» said Chris Jarvis.

Belarus may Get IMF Three-Year Credit Program

Credit Program of the International Monetary Fund (IMF) to Belarus, if any, is likely to take three years, said the head of the IMF mission in Belarus.

«If there is a new program, it will be a more long-term program than the previous one (15 months), calculated for a three-year period,» RIA «Novosti» quoted Chris Jarvis.

However, he noted that «one will have to ensure the formation of a well-functioning development bank» to provide a credit in the banking sector. «It’ll be responsible for providing development loans, currently provided by commercial banks,» he said.

Belarus’s Solvent, Jarvis

«I believe that Belarus is solvent and can pay off its debt. The Government and National Bank have been assuring that the debt will be repaid … There are objective prerequisites to believe it,» said Chris Jarvis at a press conference in Minsk.

«As for the external debt, it is manageable, as well as the schedule of its payments … In general, the ability to cover the external debt depends on the level of economic governance. Therefore, the recommended measures will allow us to deal with the external debt,» said the IMF representative.

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