Publication: Monitor Volume: 5 Issue: 209

Russia and most other CIS economies responded to the August financial crisis by tightening monetary and fiscal policies and trying to keep relations with the IMF on course. But not Belarus. At the behest of the Lukashenka government, the Belarusan National Bank (BNB) continues to print large amounts of money and issue “soft” credits (for which repayment is not expected), in order to subsidize unprofitable firms and farms, and to finance wage increases by decree. In October, for example, the BNB reported that the emission of new money during the third quarter was 35 trillion rubles the volume originally planned for the entire year. The BNB also stated that it plans to reduce monthly money supply growth in 2000 to only 4 percent, in order to bring monthly inflation rates to below 5 percent next year (down from 10 percent this year). In light of the BNB’s poor track record in bringing inflation under control in 1999, however, it is difficult to ascribe much credibility to this forecast for 2000.

While some Belarusan officials have recently expressed a willingness to begin certain economic policy changes recommended by the IMF, the decisive and comprehensive implementation of such policies are not likely at this point. For years, the IMF has been urging Belarus not only to tighten its fiscal and monetary policies, but also to abandon central planning and Soviet-style price controls. However, Belarus’ economic policies and its high inflation are likely to continue as long as the Lukashenka regime remains in power and market-oriented reforms remain stalled. Rather than looking to the IMF and the international community for assistance, Minsk continues to seek its economic salvation in Moscow, in the prospect of a Russo-Belarusan union (InsideWorld.com, RussiaToday.com, Reuters, October 22-November 4).