OREANDA-NEWS. January 10, 2013. The Belarusian government’s pursuit of excessively ambitious growth targets could weaken the balance of payments, fuel inflation, and jeopardize debt sustainability. The IMF Executive Board made a statement to this effect while finalizing the discussion of the third post-programme monitoring mission to Belarus.

Executive Directors welcomed the macroeconomic stabilization achieved after last year's crisis, but expressed concern that the recent policy loosening may undermine progress thus far.

“Policy rates have been lowered too quickly and wage increases have outpaced productivity gains, reigniting price and exchange rate pressures,” the IMF Board said.

In the face of rising downside risks, Directors encouraged the central bank to tighten the monetary stance and liquidity conditions expeditiously.

To prevent external imbalances and further buffer against shocks, Directors agreed that the flexible exchange rate policy should be maintained and that reserves should continue to be rebuilt.

Directors took note of the authorities' pursuit of balanced budgets in 2012 and 2013. However, they stressed that the appropriate fiscal stance also calls for restraint on quasi-fiscal operations, and that public sector wage increases in 2013 should be limited to the authorities' target inflation rate.

Directors emphasized that, to safeguard macroeconomic stability and ensure sustainable growth, monetary, fiscal, and wage policies must be formulated in a consistent policy framework and structural reforms implemented on a broad front.

Directors stressed that deep structural reform remains essential to raise productivity, enhance competitiveness, and boost potential growth. They regarded price liberalization, enterprise reform, and privatization as priorities, and urged faster progress in these areas. To protect the vulnerable, targeted social safety nets should be established.

Directors took note of Belarus' interest in a possible new arrangement with the Fund. They agreed that such an arrangement would need to be conditional on a strong commitment of the authorities to a comprehensive and coherent package of policies and structural reforms.