OREANDA-NEWS. The International Monetary Fund (IMF) reckons Belarus' foreign trade balance is likely to deteriorate. A forecast to this effect was voiced by IMF mission leader David Hofman at a press-conference on October 28.

At the conclusion of the mission in Minsk, Mr. Hofman made the following statement: “External pressures have eased somewhat on an improvement in the trade balance which reflects the resumption of potash exports and a reduction in imports as enterprises reduced their inventories and domestic demand moderated. A support loan from the Russian government helped to finance the substantial remaining current account deficit and sustained reserves, albeit at a low level.”

The IMF finds the economic policy of the Belarusian government inconsistent: wage growth has slowed but remains too high.

“Without decisive further action, pressures are likely to return. The growth outlook remains difficult owing to domestic constraints and the weak external environment. Meanwhile the availability of additional external financing is highly uncertain. The trade balance is expected to deteriorate again as the destocking trend tapers off and seasonal factors weigh on imports in the later months of the year,” Hofman said.

The agreement with Russia to retain oil duties offers some relief from 2015 onward but slowing Russian growth and geopolitical tensions in the region pose downside risks, the IMF mission leader said.

Hofman accentuated the point that the IMF recommendations of the 2014 Article IV Consultation remain highly relevant. In particular, the government needs to pursue a tighter fiscal stance to compensate for the expansionary effects of the high quasi-fiscal deficit-even more so if directed lending is not reduced. The National Bank of Belarus should allow more exchange rate flexibility, while tightening monetary policy, Hofman said.