Page 5 - bne IntelliNews Country Report: Belarus Dec17

2.0 Politics
2.1 IMF urges Minsk to accelerate reforms
The International Monetary Fund (IMF) has urged the Belarusian government to step up pace of real sector reforms with the aim to boost the economy’s resilience to shocks and increase growth and competitiveness prospects.
"While the authorities’ recent efforts are commendable, including to build broader support for reforms, the slow pace risks leaving vulnerabilities to linger for too long and inviting pressures for continued state involvement in resource allocation that spillover into the financial sector and public debt, and in turn put pressure on monetary and fiscal policies," the IMF said in a statement published on November 9, following the lender's mission visit to the country to conduct the Article IV consultation discussions.
Specifically, the IMF offers to adopt a comprehensive strategy to significantly improve state-owned enterprises (SOEs) efficiency and reduce quasi-fiscal pressures.
"This includes strengthening SOE corporate governance and oversight, further tightening budget constraints by cutting back directed lending and subsidies in order to prompt the upgrading and modernisation of SOEs, setting up clear criteria for state ownership or privatisation and allowing the exit of unviable enterprises, and enhancing capacity to monitor and assess risks from SOEs," the statement reads.
The IMF also recommends to continue Minsk's efforts to remove impediments to private sector growth, promote competition, including in the agricultural sector, and further liberalise prices.
At the same time, the multinational lender believes that Belarus should eliminate the end-2017 monthly wage target in favour of allowing firm-level wage adjustments linked to productivity. The current target, if achieved, would substantially increase labour costs that the weak corporate sector cannot afford.
According to the Belarusian government, Minsk believes it is possible to boost the national monthly average salary of around $400-$500 by the end of this year. According to official data, average real (inflation-adjusted) pre-tax monthly salary in Belarus stood at $400 in December 2016. In 2017, President Alexander Lukashenko repeatedly urged the government to boost the national monthly average salary to $500.
The IMF also urges Minsk to adjust household utility tariffs, and lower costs, to reach full cost recovery within two years. This will remove cross-subsidisation policies that put a burden on companies while allowing inefficient use," according to the statement.
"The current price subsidy to households should be replaced with an expanded
5 BELARUS Country Report December 2017 www.intellinews.com