Belarus tightens fiscal and monetary policies

The Belarusian government and the National Bank are taking economic policy measures to curb the domestic aggregate demand and ensure the balanced development of the economy. The National Bank has tightened the monetary management policy by using the available means, announced representatives of the Belarusian Finance Ministry.

The source explained that in view of Belarus’ falling sovereign ratings foreign investors and major foreign trade partners ask questions about the economic policy that the Belarusian government and the National Bank pursue.

The Belarusian government is working hard to reduce the budget deficit of state administration agencies from 3% to 1.5% of the GDP. The goal will be secured by increasing budget revenues via stepping up the role of raw material industries without changing the overall tax burden on the economy and by optimizing and curtailing the spending of budget organizations and the volume of state investments.

The planned restrictions will not affect the money spent on servicing and paying out the national debt. These payments will be covered by the central state budget and foreign currency reserves of the Finance Ministry. In line with article 57 of the Budget Code the payments to service and pay out the national debt are top priority ones. In February-March 2011 Belarus transferred national debt payments in full. In particular, Belarus paid out the first coupon of the sovereign eurobonds as well as the eurobonds that have been floated in Russia.

The Belarusian Finance Ministry has been pursuing a rigorous fiscal policy since January 2011. As a result, in January-February 2011 the budget surplus of the state administration budget (the central state budget, local budgets and the Social Protection Fund budget) stood at Br0.4 trillion, or 1.6% of the GDP. The dynamics will continue into Q1 2011.

In order to ensure macrofinancial equilibrium in 2011 the government has stepped up efforts to attract foreign direct investments, including by means of privatizing state property. To keep the balance of payment stable, the Belarusian government has approached Russia and the EurAsEC Anticrisis Fund with a request for stabilization loans to the tune of $3 billion. The Belarusian Finance Ministry is now in vigorous negotiations with the Russian Finance Ministry. The sides plan to finish the negotiations soon.

According to