Recent Economic Performance Since getting its independence in 1991, Belarus has faced challenges similar to those faced by other CIS countries: transition from planned to market economy, the opening of the political process, and the continued delivery of basic services in an environment of eroding government fiscal capacity. Belarus undertook limited, yet initially sufficient reforms, in an increasingly benign external environment, achieving significant economic growth and avoiding the sharp drop in per capita incomes experienced by many of its neighbors. The country has now one of the highest income levels among CIS countries and poverty rates among the lowest in ECA region. Impacts of external real and price shocks associated with the international financial crisis and the global growth slowdown have been felt increasingly in Belarus since mid-October 2008 as the country’s vulnerabilities have become exposed. The effects of the crisis on major trading partners, and Russia in particular, have led to an adverse export demand shock. The slowdown in partner countries, deterioration in terms of trade, and real exchange rate appreciation in late 2008, combined with limited access to external capital markets and delays in payment for Belarusian exports, have heightened external imbalances. The current account shocks, along with the National Bank’s efforts to support the currency peg against the US dollar, have resulted in a sizeable drop in international reserves. In the face of these mounting pressures and a poor outlook for 2009, the authorities turned to international financial institutions for assistance and began to adjust their policies.  | | Students at a social assistance seminar |
In March 2010, the International Monetary Fund approved the fourth and final US$700 million tranche of the Stand-by Arrangement program in support of the country’s efforts to respond to external shocks. The adverse impacts of the crisis have prompted a heightened importance short-term liberalization modernization program of the government, including transformation of institutions to intensify investment processes; support for innovation; strengthening an incentive structure for business operation and productivity growth; and harnessing robustness of the economy. Under the aegis of the DPL, approved in December 2009, the Bank has been working with the authorities on measures in liberalizing prices, reducing entry barriers, hardening budget constraints, and enhancing social protection. The authorities have expressed their desire for continued Bank support to further implement their reform agenda in the medium term. The European institutions have stepped up their assistance to Belarus. Challenges Ahead The reform agenda confronting Belarus is large and complex, requiring simultaneous reform of multiple layers of economic distortions arising from a far-reaching system of government regulation, administration, taxation, and support. The challenge facing Belarus is to move from extensive, public investment driven growth to productivity growth led by the private sector. This will require increase private investment, in particular foreign direct investments, to support the transfer of new technologies, and to facilitate the process of structural transformation. To address negative social effects stemming from the impact of the crisis and the policy response, it is necessary to create a fiscal space enabling expansion of well-targeted social assistance programs without undermining the macroeconomic framework. Finally, it is necessary to ensure that there is an active dialogue and consultation with stakeholders, including with the private sector, on the reform program both in relation to the response to the crisis and other longer-term measures. | 
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