OREANDA-NEWS. On 15 June 2009 was announced, that the Belarusian authorities and International Monetary Fund (IMF) specialists managed to agree most of the positions in the framework of the Stand-By Arrangement during the latest visit of an IMF mission to Belarus in April and May; the work is underway, and the IMF is expected to complete the first review of Belarus’ Stand-By Arrangement in June. Also in June, Belarus may receive the next tranche, amounting to approximately U.S. USD 400 million, IMF Resident Representative in Minsk Natalia Koliadina said in an interview.

“We are optimistic about the probability of the review meeting the scheduled date, that is, by the end of June. We have reached agreements with the authorities on virtually all the principal items, save for a few. The authorities did a good job during the mission, and we keep working fruitfully after the mission, therefore I am very optimistic about the likelihood of completing the review in June so that Belarus receives the second tranche shortly afterwards,” Koliadina said.

Asked about the specific timeframe, she said: “[The tranche will be extended] immediately after the IMF Board decides on the completion of the first review. The Board meeting is expected at the end of June.”

She also commented on the discrepancies. “There are a few matters that still remain uncoordinated. Those were not major stumbling blocks, but the Belarusian authorities needed time to ponder over the options they had.”

According to Koliadina, it would be out of place to maintain that the IMF insists on another one-off devaluation move. “We do not insist on devaluation in a single move. We suggest that the authorities use the opportunities offered by the current exchange arrangements, which provide a certain flexibility in setting exchange rates,” she said.

“The foreign exchange market stabilized in mid-March, and even now that the situation remains tense, there has been a major shift since January 2009. Devaluation expectations were not ungrounded then, because problems tended to accumulate in October, November and December; furthermore, the Russian ruble depreciated significantly against major currencies. New expectations of devaluation are now observed mostly because of momentum,” Koliadina said.

She recommends addressing this exchange rate policy in the context of four sectors: fiscal, monetary and real, and the balance of payment.

“If the government keeps making concessional loans to support the manufacturing sector or housing construction, Belarusian monetary policy will grow weaker and the state budget will be affected, hence inevitable exchange rate shifts. If everything remains the way it was agreed during the talks – a balanced budget and prudent monetary policy (and the National Bank pursues a quite rigid monetary policy) – no adjustments in the exchange rate of the ruble may be required,” Koliadina said.

Commenting on Belarusian fiscal policies, she said the IMF welcomed the idea of the Belarusian authorities to balance the state budget. “Budget expenditures have been revised downwards, and we believe it is an adequate move under the circumstances. Social spending remains unchanged, while other expenditures may be curtailed at the government’s own discretion,” she said.

“When it comes to wages, our program envisaged no changes in the first half of the year, and we have had no discrepancies here,” Koliadina said.

She also supported the government’s intention to pursue a tax reform.

“The abolition of the turnover tax will definitely have a positive impact on the economic expansion,” she said. “To prevent the negative effect of the tax reform, the value-added tax rate goes up – many countries opt for the same scenario.”

She believes the move may be made in summer.

At the same time, Koliadina doubts that these measures will help balance foreign trade figures. “The objective is not to cut imports using administrative measures, but to increase the competitiveness of the economy, which requires reductions in input costs, including labor costs, so as to make them lower compared to what trade partners have,” Koliadina said.

“Labor costs tend to go down globally, and I believe a comparison of labor input and other costs in Belarus and other countries would be in place so that the country focuses on reducing them thus making its economy competitive after the crisis,” she said.