Reflecting excessive credit expansion, monthly consumer price inflation was 31.3 percent in December. The overall budgetary performance was, however, significantly better than expected, owing to higher revenues and savings in outlays, made necessary by the lack of external financing. Nevertheless, the 1994 external current account deficit widened to 11.6 percent of GDP as prices paid by Belarus for its energy imports moved towards international levels. Given the goal of reducing inflation and the existence of external financing constraints, the authorities will pursue a tight monetary policy by limiting the expansion in base money and bank credit, and by maintaining positive real interest rates. Structural Reforms Price liberalization, and adjustment of remaining administered prices for utility services, are a critical element of the authorities' reform program.
Food prices are to reflect market forces and domestic energy prices their full import costs.
Remaining impediments to the full unification of the foreign exchange market have been removed, and barriers to exports lifted. Credit allocation is to be made increasingly on market terms. Privatization will be accelerated and will focus on both small and large state enterprises. The Government intends to continue financing an adequate social safety net to shield vulnerable groups of the population against the impact of price liberalization. The program, if fully implemented, should make a decisive contribution to stabilizing the Belarussian economy and reforming it along market lines.