Belarus will not change economic policies

The IMF mission has continued its work in Minsk. The Belarusian authorities do not hide their reckoning on the new loan. However, the IMF has not demonstrated much excitement about the Government and the National Bank’s Joint Action Plan for structural reform and improving economy’s competitiveness.

The Action Plan for structural reform was designed for external creditors, but its implementation depends entirely on the political will of the Belarusian leader. Belarus talks about a gradual transition to a market economy in order to improve its image among investors and creditors. However, de facto, Belarus carries on with its current economic policies, as President Lukashenko will not allow economic reforms ahead of the 2015 presidential campaign.

The Belarusian authorities are aware of the problems in the economy and understand the need to remedy the economic situation. While talking about the Government and the National Bank’s joint Action Plan, Finance Minister Maxim Ermolovich said, that “the Plan had to be developed due to the economic imbalance, rapidly increasing since early 2013”.

The Belarusian authorities seek to solve the economic problems by attracting new loans, without introducing significant changes in the economic policy. The scale of economic transitions (to meet the IMF requirements) will depend on the outcomes of negotiations about oil and other subsidies between Belarus and her Eastern neighbour.

Belarus regards Russian subsidies as the main source of financing. Unlike the IMF, Russia sets much less stringent requirements for structural economic reforms. In Belarus, economic policy depends on the election cycle (next peak in 2015). Therefore, Lukashenko is unlikely to agree on any reforms ahead of the elections and government and National Bank officials are well aware of this.

Belarus wants to demonstrate economic policy progress to the IMF and to receive a positive feedback, which would improve Belarus’ image in the eyes of foreign investors. For instance, Economy Minister Snopkov said, that “I do not want money from them [the IMF], I need a positive feedback, because positive assessment by the IMF is a positive sign for investors”.

In 2015, President Lukashenko will be the least willing to reform the economy. However, Belarus’ actions will largely depend on the outcome of negotiations with Russia about economic subsidies to Belarus. The Belarusian authorities would rather ‘cut down’ social benefits for population, than make fundamental changes to the economy ahead of the elections.