MINSK -- The International Monetary Fund (IMF) has recommended Belarus to reduce dollarization of the economy and adhere to a flexible exchange rate policy.
The IMF emphasized the importance of maintaining exchange rate flexibility as a buffer against shocks as well as discouraging dollarization, according to the IMF public information notice released Wednesday following the Fourth Post-Program Monitoring discussions with Belarus conducted by the IMF Executive Board.
IMF experts stressed the need for a tight management of domestic demand to further reduce inflation, contain reemerging external imbalances, and ensure adequate capacity to meet external obligations.
"Executive Directors of the IMF welcomed the authorities' commitment to a balanced budget, but stressed the importance of reflecting fiscal risks from quasi-fiscal operations and directed lending in the budget. Nominal wage growth should not exceed the target inflation rate in 2013 to avoid fueling domestic demand and to help recover lost competitiveness," said notice.
The IMF expressed concern about rapid foreign currency lending growth, mostly to unhedged borrowers, and encouraged Belarusian central bank to consider additional measures to curb such lending, and to maintain the prohibition on such lending to households.
Directors also stressed the need to boost productivity and competitiveness, including price liberalization, privatization and restructuring of state-owned enterprises, and targeted social safety nets.
Between January 2009 and April 2010 Belarus implemented a standby program backed by a 3.6-billion-U.S. dollar IMF loan.
