Belarus was initially in the ruble area, and exposed to the problems of the Russian economy, but by 1993 it had moved to an awkward mix of its own currency with many elements of the previous central planning. Throughout there were on-off moves towards closer integration with Russia (and rises and falls in the energy price charged by Russia). From 2000 monetary policy itself became less incoherent but the persistence of directed and subsidised credits to SOEs and periodic attempts to stabilise the exchange rate continued to obstruct effective policymaking.

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 roubles) 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; auctions of central bank credit 1993; 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
2000-17 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; 2000s some remonetisation and dedollarisation; subsidised energy imports from Russia contribute to growth, while price controls help to 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 IMF staff and authorities; 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 Eurasian Economic Union; 2015 on more serious moves towards stabilisation, liberalisation; 2016 currency reform (redenomination); planned adoption of inflation targeting, but some important prior measures required; statistical data adequate by end of period loosely structured discretion LSD

Selected IMF references: Pre-membership Economic Review Supplementary Information March 1992 pp11-18; RED 1993 pp18-27, 36-8, 111; SR 1993 pp10-14, 15-16; RED 1994 pp26-32, 35, 40-2, 134, 150-2; SR 1994 pp12-15; RED 1995 pp26-32, 36, 43-5, 143; RED 1996 pp25, 32, 38-40; SR 1996 pp2-7, 9-10, 11-12; RED 1997 pp33, 37-40, 44-5, 47; RED 1998 pp7-8, 32, 37-40, 43-7; SR 1998 pp13, 23-6; RED 1999 pp6-7, 14-18, 95-102; SR 1999 pp5-13, 15-17; RED 2000 pp34-8; SR 2001 pp5, 7, 11-12, 13, 16-19; SI 2002 pp47-48, 56; SI 2003 pp42-6; SR 2003 pp8, 15-18; SR 2004 pp5-10, 13, 15, 18, 19-20; SI 2005 pp13-15; SR 2005 pp6-7, 10, 11-13, 16-17; SR 2006 pp5-6, 9, 11-12; SR 2007 pp6-8, 14-15; SR 2009 pp1, 5, 7, 9-11, 12, 16-20; SR 2011 pp3-7, 17; SR 2012 pp4-5, 7; SR 2013 pp8-10; SR 2014 pp4-5, 10, 12-13; SR 2015 pp4-7, 9-15; SR 2016 pp6-7, 9-11, 15-20; SR 2017 pp4-7, 16-18.

Other references: Miksjuk et al. (2015).

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