Belarus needs fundamental economic reforms to reduce fiscal risks – IMF mission

<p> MINSK, Dec 21 - PrimePress. In order to reduce fiscal risks in Belarus, it is necessary to implement fundamental economic reforms, reads the staff concluding statement of the 2021 Article IV mission of the International Monetary Fund (IMF). </p> <p>   </p> <p> As previously reported, led by mission chief for Belarus Cheikh Gueye, an Article IV mission of the International Monetary Fund (IMF) operate in a virtual mode fr om 29 Nov to 17 Dec to make a traditional annual overview of Belarus’ economy. The mission conducted online meetings with representatives of Belarus’ economic bodies, the National Bank and experts. </p> <p>   </p> <p> “High fiscal risks call for further consolidation measures and risk management. Current sanctions lim it space for roll-over and new issuances of public debt on the Eurobond market. Although the authorities can continue to borrow on other markets, institutions and countries, a further reduction of the fiscal deficit in 2023 would alleviate pressure to issue new debt. A key concern is that 93 percent of public debt is denominated in foreign currency and thus vulnerable to exchange rate movements. Another concern is that implicit contingent liabilities from state-owned enterprises and public banks could lead to a substantial drain on public finances. Also, debt issued by the Asset Management Agency would be classified as public debt in international statistics. Addressing these concerns requires fundamental economic reforms,” the mission statement says. </p> <p>   </p> <p> The IMF experts point out that the fiscal deficit widened during 2020-21 but the increase in public debt has been limited. Support to state-owned enterprises continues to weigh on public finances. In addition, a change in Russia’s oil taxation regime (the ‘tax manoeuvre’) generates losses of Belarusian export duties, while the 2020 recession led to a loss of corporate income tax. The overall general government balance is now projected at -3.1 percent of GDP for 2021. With a stable nominal exchange rate, public debt remains below 50 percent of GDP. </p> <p>   </p> <p> “Faced with limited financing options due to international sanctions, there are limited alternatives to the authorities’ plans to significantly reduce the fiscal deficit. A number of revenue measures together with a reduction in public investment—in particular the finalization of the construction of the nuclear power plant—will contribute to reduce the 2022 general government deficit to 2.1 percent of GDP. Underlying budget assumptions are conservative, providing headroom for possible expenditure overruns to provide additional support to the economy, including support for unproductive state-owned enterprises and their reforms. Financing sources for 2022 are largely identified, and government deposits of about Br24 billion ($9.46bn) can be used in case of actual financing falls short of plans.” </p> <p>   </p> <p> Belarus has been a member of the IMF since 1992. In 2009-2010, the IMF stand-by programme was implemented, under which Belarus received a loan of $3.46 billion. In April 2020, Belarus requested $940 million from the IMF as part of the rapid financing instrument to deal with the impact of the pandemic coronavirus. The request was rejected because of disagreements over the non-financial conditions of the allocation. </p> <p>   </p> <p> On 23 Aug 2021 as a result of the IMF general allocation of Special Drawing Rights (SDRs) equivalent to US$650 billion, Belarus was awarded a 0.14% quota - an SDR equivalent of about $925 million. The SDR allocation was intended to boost global liquidity amid the coronavirus pandemic. End </p>

2021-12-22

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