Belarus

Years

Targets and attainment

Classification

1992-99

independence August 1991 (out of FSU); at first continued use of ruble, but shortage of currency leads to resort to cheques; central bank (from Belarusian branch of USSR central bank) and range of commercial banks, some of them ex-USSR specialised banks, most owned in part by major clients; main monetary instruments are reserve requirements, refinancing rate and overdraft rate; but membership of ruble area dominated by Russia (though financially segmented) limits role for domestic monetary policy, exposes economy to hyperinflation and payments system difficulties; January 1992 (at time of major price liberalisation) cash shortage leads to issue of coupons in proportion to income payments, required (with rubles) for purchase of many goods; May 1992 central bank reacts to cash shortages by issuing ‘rubel’ payment certificates as parallel currency at fixed parity, late 1992 these rubels made obligatory for many purchases; by end-1992 rubels account for 80% of banknotes in circulation, by June 1993 96%; 1993 law limits central bank lending to government and gives central bank more control of interest rates (which remain negative in real terms) and reserve requirements; more emphasis on credit aggregates, banks no longer obliged to lend for planned investments, 1993 auctions of central bank credit; from January 1992 FSU exchange system replaced by national controls, with multiple exchange rates, partly consolidated early 1993 with move to auctions operated by central bank; mid-1993 Russian monetary reform, then Belarusian forex crisis; 1993-4 monetary and economic unification with Russia discussed but not agreed; 1994 stronger government pressure on bank credit allocation; noncash Belarusian ruble used from mid-1992, fluctuates vs other noncash rubles from late 1992, but cash Belarusian ruble (rubel) declared legal tender only May and sole legal tender August 1994; new government from mid-1994 leads at first to more decisive stabilisation and structural reform policies, including monetary policy focused on stabilising exchange rate vs USD, and making more use of interest rates; 1994-5 further forex and trade liberalisation; earlier restrictions on conversion of noncash rubels to cash lifted end-1994; peg to USD held most of 1995 and early 1996; customs union with Russia (and two other FSU republics) 1995; some use of central bank and government security issues; recurring policy slippages, prior liberalisation measures reversed, resort to administrative measures in forex market and elsewhere, with expansionary monetary policy via subsidised credit allocation directed by presidential administration; little structural reform, easy access to credit for SOEs, rise in enterprise arrears, weakening of banks’ finances; late 1996 rise of parallel forex market where rate depreciates faster than official rate through 1997; forex crisis March 1998, authorities respond by tightening controls, while economy becomes more dependent on financial assistance from and barter trade with Russia; August 1998 Russian financial crisis has adverse effects including fall in growth and further sharp depreciation, but policy not immediately tightened and no change to strategy of large directed credits plus strong state controls; high but varying dollarisation; longstanding practice of off-budget public spending via banking system; 1999 political and economic union with Russia agreed

unstructured discretion UD

2000-23

2000 exchange rate unification and adjustable crawling band vs Russian ruble announced, but de facto target remains previous informal anchor, USD; goal but not details of monetary union with Russia agreed; limited structural reform, but large centrally-mandated USD wage targets; IMF repeatedly criticises monetary and exchange rate policies, and calls for serious structural reform; ongoing banking sector fragility; disagreements with Russia 2002 over political and monetary unification; 2003 Russian ruble appreciates, Belarus dual exchange rate targets become more problematic, decline in enthusiasm for unification in both countries; state intervention in economy remains high, even rises, quasi-fiscal activities remain important; some remonetisation and dedollarisation 2000s; subsidised energy imports from Russia contribute to growth, while price controls help hold down inflation; liquidity crunch late 2004 concentrated in two largest state-owned banks (despite recapitalisations); by 2005 failure to agree key details renders monetary union impossible by 2006 target date; 2006 wider disputes between authorities and IMF staff; 2007 sharp rise in Russian energy price paid by Belarus; 2008-9 adverse effects of GFC cushioned by large devaluation vs USD early 2009, switch of peg to basket and smaller subsequent depreciation within band, supported by rise in directed  lending; reduced subsidies on energy imports from Russia; Common Economic Area agreed with Russia, Kazakhstan, late 2010; exchange rate band adjusted start-2011; macro and wage policies loosened 2010, forex crisis with sharp depreciation March 2011, policies more stabilising from June 2011; late 2011 partial restoration of Russian energy subsidies; 2013-14, against IMF advice, authorities insist on continuing directed lending and not tightening macro policy; stop-go policies with renewed forex crisis and inflation spike in 2014; 2015 large devaluation, crawling peg replaced by flexibility guided by currency basket plus money targets; more focus on ongoing weaknesses in financial sector; 2015 start of Eurasian Economic Union; from 2015 more serious moves towards stabilisation and liberalisation; 2016 currency reform (redenomination); plans for adoption of inflation targeting, but important prior measures required; dollarisation declining but still very high; 2018 change in Russian tax system likely to adversely affect Belarus current and fiscal accounts; early 2018 monetary policy shifts from targeting money to targeting interbank rate, some decline in directed lending, some forex liberalisation, but interest rate caps remain; central bank independence increased but needs to be entrenched; by 2020 significant improvements in central bank forecasting and decision-making processes, monetary policy framework moving towards inflation targeting ‘lite’; Covid-19 brings mild recession; 2022 Ukraine war, global commodity prices rises and economic sanctions; central bank independence weakened from 2020; 2022 emphasis on growth rather than stability, increasingly rigorous direct price controls, rise of inflation overhang; informal inflation targets overshot 2020-22, undershot 2023, with targets raised 2022 and 2023; statistical data broadly adequate by 2018 but may have deteriorated

loosely structured discretion LSD