Country Report Belarus December 1998 Main report

Economic policy: Reckless credit expansion still presented as pos pol

The Belarusian government continues to finance its economic policies through monetary emissions that far exceed projected figures. Instead of the planned monetary emission of BRb5,500bn for 1998, the National Bank of Belarus (the central bank) will issue at least BRb23,000bn by the end of the year. According to data provided by Belarus Economic Trends, Mr Lukashenka's recent decree to raise the 1998 budget deficit from 3.5% to 5% will alone require credits of BRb6,000bn. The bulk of credit expansion in Belarus takes the form of directed credit to the industrial and agricultural sectors, a policy supported by the governor of the central bank, Piotr Prakapovich, who has confirmed the bank's full support of the Council of Ministers' projects. Credits issued this year by the central bank, which Mr Prakapovich describes as vitally important for continued economic growth, have increased at twice last year's rate, including six new credit lines to finance food production programmes alone. Increasingly, however, these policies have failed to maintain high growth in the face of Russia's problems, and have played a significant role in fuelling unsustainable rates of inflation.

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