RREEVVIIEEWW––22000000

ECONOMY ANDBANKING SYSTEM

N A T I O N A L B A N K O F T H E R E P U B L I C O F B E L A R U S

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1. Introduction 55

2. Socio-economic development strategy and factors of investment attractiveness of the Republic of Belarus 59

2.1 General description of the Belarusian economy and long-term priorities of socio-economic development 61

2.2 Implementation of major social-economic priorities and role of monetary policy 63

2.3 Directions of state regulation promoting investment attractiveness of the Republic of Belarus 65

3. Monetary policy and development of the banking system 69

3.1 Objectives and tasks of monetary and foreign exchange policies in 2000 and implementation thereof 71

3.2 Banking system development 76

3.3 Payment system and instruments development 78

3.4 International cooperation 82

4. Monetary policy guidelines for 2001 85

5. List of commercial banks registered in the National bank of the Republic of Belarus as may 1, 2001 95

6. Independent auditors’ report 99

CONTENTS

INTRODUCTION

1

57The year 2000 was remarkable for the Republic of Belarus and itsbanking system not only because it was a closing year of the centuryand millenium but for two other reasons as well.

First, it was the final year in the implementation of the Socio-eco-nomic Development Guidelines for 1996-2000 (hereinafter — the“Guidelines”), a program document setting forth strategic objectivesof the country’s policy as a whole and predetermining, to a greatextent, specific contents of monetary policy. It is worthwhile notingthat monetary policy has been improving over the past five years, itsstrategic orientation being consistent. In 2000, it acquired some newquality features, the most important being Belarusian ruble exchangerate unification and cessation of directed credits provision by theNational Bank of the Republic of Belarus (hereinafter — the“National Bank”) to the economy.

Second, in 2000, the Belarusian two-tier banking system was tenyears old. While historically this is not a very long period of time,major efforts were undertaken during this period to establish anddevelop the banking system of a sovereign state with all the requiredtrappings and, most importantly, efficient performance.

Since monetary policy is an integral part of the entire system ofgovernment economic regulation, this review describes policy’s strat-egy of the state and major results of its implementation, discloses evo-lution and current state of the banking system and monetary policy,as well as its guidelines for 2001.

SOCIO-ECONOMIC

DEVELOPMENT STRATEGY

AND FACTORS OF INVESTMENT

ATTRACTIVENESS

OF THE REPUBLIC OF BELARUS

2

61Belarus is one of the republics of the former Soviet Union (FSU)which gained independence in 1991. Its population is about 10 millionpeople, capital city — Minsk (nearly 2 million people). The country isdivided into six administrative regions (oblasts) — Brest, Vitebsk,Gomel, Grodno, Minsk and Moguilev whose territory and populationare approximately equal in size (exclusive of Minsk oblast which ismuch larger in terms of population). On the North, Belarus bordersupon Latvia and Lithuania; on the East, Russia; on the South,Ukraine; and on the West, Poland. About 70% of its population areurban dwellers. Industry is the backbone of the production complex.

Belarus was one of the most advanced republics in the FSU. Insuch indicators as GDP per capita and industrial and agricultural out-put it exceeded the average level. On the other hand, Belarus’ econo-my was a relatively small cell of a single national economic complexand almost fully relied on imported raw and other materials, fuel andenergy resources, semi-finished goods and completing items.Therefore, the break-up of the Soviet Union could not but adverselyaffect economic trends in Belarus.

After 1991, a deep recession began to show in virtually all thesocio-economic indicators. During 1992—1995, real GDP dropped bymore than a third; industrial output, more than 40%, with the aver-age monthly inflation rate amounting to 15—20%, whereas house-holds’ real incomes, on the whole, declined by 38%.

Given this, the need for reversing trends in the economy and socialsector and making them positive became the necessity of life, indeed.

In 1996, country’s Socio-economic Development Guidelines for1996-2000, a program document setting forth strategic objectivesand priorities of the state policy was devised. It was approved by thePresident of the Republic of Belarus and endorsed by the All-Belarusian People’s Assembly.

Pursuant to the Guidelines, the paramount objective of socio-eco-nomic reform in the country was to enhance the living standard of theBelarusian people, gradually bringing their welfare closer to that ofthe industrialized European nations. To this end, having regard tothe existing traditions and Belarusian historical experience, a social-ly-oriented market economy model was identified which is based onmarket economic principles, providing at the same time a high degreeof social protection for people and active involvement of the state inthe regulation of socio-economic processes.

Taking account of these tasks, exports, housing and food wereidentified as major priorities. These are in line with the specificnature of the country’s economy and their implementation was

2.1 GENERAL DESCRIPTION OF THE BELARUSIAN ECONOMY AND LONG-TERM PRIORITIES OF SOCIO-ECONOMIC DEVELOPMENT

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expected to ensure the establishment of an adequate framework formeeting the most critical objective of the state, i.e. improvement inthe living standard, as well as materialization of other specific goalsand tasks of economic policy.

Development of the export potential was determined to be a prior-ity, because the Belarusian economy depends, by and large, on the out-side world. Fuel, energy and raw materials stock is significantly lim-ited, while the ratio of goods and services exports and imports to GDPexceeds 100%. The country’s economy is not large, and thereforemanufacturing the entire range of required production and consumergoods in the country is not feasible. It is only by increasing the exportpotential that the appropriate imports needed for proper operation ofthe national economy and meeting consumer demands could beassured.

Identifying housing as a priority was due to the fact that, first, itis the provision of people with quality dwellings that serves as a long-term basis for tackling major social problems and establishing a favor-able demographic situation. Second, during 1992—1995, this sectorappears to have been hardest-hit by the economic crisis compared withother industries. In 1995 alone, investment in housing fell by 44%(the overall decline during the period in question being nearly threetimes); commissioning of housing stock fell 2.8 times, as compared to1991. To reverse this trend, adequate concentration of resources insaid areas was required.

The significance of food as a priority derives from the fact that,given complex external conditions inherent in the economic and polit-ical space of the former Soviet Union, particularly in the first half ofthe 1990s, raising the level of food security was critical for assuring astable socio-political situation on the whole.

63Implementation of the Socio-economic Development Guidelines for1996—2000 ensured a reversal of economic trends (Fig. 1).Beginning from 1996, positive economic growth rates were perma-nently observed. Over the five-year period, real GDP grew by almost36%; industrial output, by 65%; real household incomes, by 71%.

These achievements were mainly due to the implementation, byand large, of the priorities laid down in the Guidelines. Exports (indollar terms) in 1996—2000 grew, on average, more than 2.2 times,compared with 1992—1995. Capital investment in housing in 2000increased more than 1.7 times versus 1995, while the total commis-sioned housing stock increased 1.8 times. Agricultural productionwas, by and large, stabilized.

2.2 IMPLEMENTATION OF MAJOR SOCIO-ECONOMIC PRIORITIES AND ROLE OF MONETARY POLICY

1992 1993 1994 1995 1996 1997 1998 1999 2000

40

30

20

10

0

-10

-20

-30

-40

-50

Fig. 1.

DYNAMICS OF SOME ECONOMIC GROWTH INDICATORS

*

*

*

**

**

*

*

GDP

Industrial Output

Real Income of Household

Agricultural Produce

Commissioning of Housing Stock

*

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Monetary policy was instrumental in implementing theGuidelines. On the whole, it was being progressively tightened: wherein 1992-1995 the ruble money supply increased almost 2150 times, orby 17.3% per month on average, in 1996—2000 the nominal rublemoney supply increased 53.6 times, or by 6.9% per month on average,i.e. 2.5 times less. The pace of average monthly devaluation of theBelarusian ruble official exchange rate decreased 3.2 times (from 25.6to 8% per month on average). As a result, a decline in production wasbeing overcome against the background of declining inflation rates.During 1996—2000, the average annual value of the GDP deflatorreduced 5.4 times compared with 1992—1995. It was not only due toa mere tightening of monetary policy: the fact that its contents hadchanged and continuous efforts were underway to improve the func-tioning of the banking system as part and parcel of the national eco-nomic complex was also essential. For example, in 1996—1999 boththe relative size of credit issue by the National Bank and its orienta-tion underwent changes. Credits were issued with a view to financingpriority industries (particularly the housing and agro-industrial com-plexes). In 2000, the National Bank virtually ceased directed lending,and credits to the national economy were granted on a non-issue basis.

Another result of socio-economic policy in 1996—2000 was theestablishment of the organizational and legal framework for develop-ing market relations, including a two-tier banking system, foreigncurrency and stock exchange, extensive employment service, taxinspectorate, etc. The level of social protection was rather high.

It is important to note that said results were achieved withoutexternal debt growing; rather, it was decreasing, amounting to near-ly $215 per capita in late 2000.

Such positive developments in economic growth were a major fac-tor of social stability and enabling investment climate.

65Implementation of the Guidelines ensured social stability which isthe most important factor of investment attractiveness of the repub-lic. There is virtually no serious ethnic, social or political strife.Unemployment rates do not exceed 2—3% of the economically gainfulpopulation and are among the lowest not only in the FSU but in theworld at large. The system of free secondary education and health isintact. It is also quite realistic for every citizen to get free higher edu-cation. It is not by chance that, as regards the “human developmentindex” which is calculated by the UN on the basis of various numerousindicators, such as GDP per capita, average life expectancy, educa-tional level, health services, etc., in 19991 Belarus ranked rather high— 60th (among the FSU republics only Estonia ranked higher —54th).

In addition, the following are important factors contributing tohigh investment attractiveness of Belarus: a favorable geographicalposition, rather extensive infrastructure, cheap but skilled labor. TheGovernment is endeavoring to materialize these long-term advan-tages providing foreign investors with both indirect (through tax andcustoms privileges) and direct support.

Tax privileges for foreign investors are laid down in the Law “OnForeign Investment in the Republic of Belarus”, the Law “On Taxes onIncomes and Profits of Enterprises, Associations and Organizations”,Decree of the President of the Republic of Belarus # 43 “On Taxationof Incomes in Certain Fields of Activity” dated December 23, 1999,and other regulatory legal acts of the Republic of Belarus. They stip-ulate the following tax privileges for enterprises with foreign invest-ment:

■ Property, raw and other materials brought into the country by aforeign shareholder as a contribution to the authorized fund of anenterprise with foreign investment shall be exempt from customsduties and import tax. Personal property brought into the repub-lic by foreign staff of enterprises with foreign investment for ownuse shall be exempt from customs duties.

■ Enterprises with authorized funds in which the share of a foreigninvestor exceeds 30% and whose proceeds are generated throughmarketing own-produced services and goods shall be exempt fromprofit tax during three years from the date they report profit,including the first profit-yielding year.

2.3 DIRECTIONS OF STATE REGULATION PROMOTING INVESTMENT ATTRACTIVENESS OF THE REPUBLIC OF BELARUS

1 The last year for which the index was calculated.

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■ The legal regime of foreign investment in the Republic of Belarusand conditions for operation of foreign investors and enterprisesestablished with their participation may not be inferior to theappropriate regime for property and property rights as well as tothe environment for investment activities of Belarusian legal andnatural entities, except in cases prescribed in the existing legisla-tion.

■ Where legislative acts of the Republic of Belarus adopted after theregistration of an enterprise with foreign investment impair thesituation of and conditions for operation of foreign investors andenterprises established with their participation (i.e. they areentrusted with additional or expanded responsibilities comparedwith previous ones or their powers are restricted or they aredeprived of their rights), legislation which was in effect on thedate of registration of an enterprise with foreign investment shallbe applied to investors, enterprise with foreign investment and/ orforeign investments during five years.

Pursuant to the Law of the Republic of Belarus “On AmendingSome Legislative Acts of the Republic of Belarus” dated January 31,2000, an amendment was made to the Law of the Republic of Belarus“On Taxes on Incomes and Profits” dated December 22, 1991, per-taining to foreign legal entities bringing into the Republic of Belarusgoods for exhibitions, selling exhibitions and fairs. Should suchgoods be sold, foreign legal entities are required to pay tax at a 10%interest rate of the customs cost of the good declared at the time ofcustoms registration in a manner which makes it possible to involvegoods in civil turnover.

With respect to credit and financial institutions, Decree of thePresident of the Republic of Belarus # 43 dated December 23, 1999,prescribes that the tax base of credit and financial institutions withforeign investors’ participation as well as credit and financial institu-tions fully owned by foreign investors is reduced by the amount ofcontributions to the reserve (insurance) fund at a rate laid down in theconstituent documents, however, not to exceed 25% of the actuallyestablished authorized fund.

The tax base of credit and financial institutions with participationof foreign investors whose share in the authorized fund exceeds 30%is reduced, during three years from the time they report profit, by theamount of profit from selling own-produced services. Where theauthorized fund is established within the time limit stipulated by leg-

67islation of the Republic of Belarus and income not related to own-pro-duced goods (works, services) is generated during said period, thegrace period commences in the first profit-yielding year starting fromthe month in which profit from selling own-produced goods (works,services) is secured.

The National Bank takes a favorable attitude towards the increaseof foreign capital in the banking system of the country. In this con-text, preferential conditions were introduced in 2000 for the estab-lishment and regulation of activity of joint and foreign banks in freeeconomic zones (there are five such zones in the republic and theestablishment of the sixth one, in Moguilev oblast, is under consider-ation). They provide for a simplified procedure for registration andreporting as well as exemption from certain norms and restrictionsmandatory for other banks operating in the rest of the country.

MONETARY POLICY

AND DEVELOPMENT

OF THE BANKING SYSTEM

3

71Monetary and foreign exchange policies in 2000 were conducted inaccordance with the Monetary and Foreign Exchange Policies Conceptfor quarter IV of 1999 and 2000 and Monetary Policy Guidelines for2000. These program documents were agreed with the Republic ofBelarus Socio-economic Development Forecast for 2000, Law “On theYear 2000 State Budget” and approved by the Government and theNational Bank. In accordance with these documents, the main objec-tives of monetary policy were as follows:

— to create an adequate environment for the attainment of criticalobjectives and tasks of socio-economic development of the state;

— to ensure internal and external stability of the official monetaryunit;

— to maintain stable prices; and

— to normalize the foreign exchange market.

Under these documents, the following tasks were expected to beaddressed:

— to accomplish transition to tight monetary policy by substan-tially restricting the volume of credit issue using it to finance budgetdeficit;

— to ensure lending to the national economy mainly on a non-issuebasis at the expense of banks’ resources;

— to accomplish transition to the unified exchange rate of theBelarusian ruble and to ensure its stability and predictability;

— to carry out measures required to strengthen the banking sys-tem and to ensure smooth payment procedures; and

— to intensify cooperation with central banks of other states (firstof all, with the Central Bank of the Russian Federation (hereinafter —the “Bank of Russia”) and with international financial institutions(IFIs).

In implementing its monetary policy, the National Bank consider-ably restricted the growth of net domestic ruble credit which in 2000was as low as BYB61.2 billion. This is much less in comparison withboth its planned maximum value (BYB90.5 billion) and 1999 (nearly30% in nominal terms and more than four times in real terms).

The National Bank financed the republican budget deficit in theamount of BYB73.3 billion. BYB2.9 billion in credits at the refinanc-ing rate of the National Bank were granted to cover the current repub-lican budget deficit and BYB1.4 billion to purchase government secu-rities in the primary market.

3.1 OBJECTIVES AND TASKS OF MONETARY AND FOREIGN EXCHANGE POLICIES IN 2000 AND IMPLEMENTATION THEREOF

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Credits to the economy were granted in amounts necessary toattain the approved parameters of economic growth. The totalincrease in gross credits granted by the Belarusian banks to theGovernment and the economy in 2000 exceeded BYB1,150 trillion,including BYB382.7 billion in the national currency (versus projectedBYB385 billion). The main share of banks’ ruble credit growth wasused for granting credits to the economy (BYB377 billion, or 98.5%of the total increase in gross ruble credits of banks).

Resource support of banks in 2000 was rendered solely on marketterms. Banks’ large-scale lending to the economy and their involve-ment in budget deficit financing, formation of banks’ resources in theamount sufficient for effective settlements, especially during the taxpayment period, necessitated systematic support of banks’ currentliquidity. This support was rendered by the National Bank basically inthe form of lombard credits, overnight credits and purchase and saleof Government securities.

Since February 2000, a positive real level of the refinancing ratewas secured: throughout the year, it was maintained at the levelbetween 0.4% and 4.9% a month. Interest rates for credit and depositruble operations were also maintained at the level not lower than theinflation rate. It was a major factor of shoring up the ruble whosemarket quotations were devaluing at a rate of nearly 3.5% a month,on average.

On September 14, a unified exchange rate was introduced whichwas one of the most important achievements of monetary policy in2000. Elimination of multiple exchange rates and expanding scope ofBelarusian ruble utilization in foreign trade significantly improvedconditions for Belarusian enterprises involved in foreign economicactivity. Exporters’ situation also improved due to the abolishment ofa “tax” imposed on them, whereby exporters were required to surren-der part of their foreign exchange proceeds at an undervaluedexchange rate. In addition, transition to the unified exchange rate, onthe one hand, ensured elimination of economic prerequisites for thedevelopment of “shadow relations” in the field of foreign exchangeand, on the other, created conditions necessary for the achievement ofhigh transparency and controllability of the foreign exchange market.

The National Bank undertook major efforts with a view to buildingup gold and foreign exchange reserves of the state. Net foreign assetsincreased almost three times and exceeded USD150 million as of theyear-end. In a large measure, it was due to the positive balance of theNational Bank in foreign exchange market operations. Therefore,nearly 60% of 7.3% of the average monthly growth of the ruble

73money supply was related to the issue of rubles from purchasing for-eign currency. It should be noted that such combination of trends (i.e.market exchange rate stabilization coupled with an increase in foreignassets at a time when foreign trade balance was negative) became pos-sible due to a much tighter interest rate policy and restriction of rublecredit issue rates.

The financial potential of the banking system increased substan-tially. The total own capital of commercial banks grew in real terms by40%, almost all of them increased their authorized funds to a levelwhich is not lower than the prescribed one (EUR2 million for all com-mercial banks and EUR5 million for joint and foreign banks).

Consumer Price Index Own Capital Total Assets

Fig. 2.

DYNAMICS OF OWN CAPITAL AND ASSETS OFOPERATING BANKS IN 2000(01.01.2000 — 100 %)

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%350

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There was a significant increase in the amount of resourcesattracted by banks from the public. Citizens’ ruble deposits in realterms grew nearly 1.9 times, amounting to BYB112.8 billion; foreigncurrency deposits grew by 26.7% (up to USD252.4 million). Largelydue to this, the banking system ensured provision of credits to theeconomy in required amounts, mainly without issue credits of theNational Bank.

Funds attracted from enterprises and organizations almost tripledduring the year and remain the major source of attracted funds.

The following pie diagram shows dynamics and structure of banks’assets in 2000.

Funds and Income of Banks

National Bank Credits

Bank Accounts

Interbank Credits

Deposits of Households

Resources Attracted from Enterprises and Organizations

Issued Debts

Other Liabilities

Fig. 3.

BANKING SYSTEM STRUCTURE OF LIABILITIES

11.3%44.1%

1.1%13.4%

16.6%

6.0%

2.0%5.5% 40.8%

1.0%14.1%

15.0%

2.7%1.4%

15.8%

9.2%

As of 01.01.2000 As of 01.01.2001

75

As before, credits remained the primary area of banks’ invest-ment: the share of credits in the total assets of the banking system vir-tually did not change, accounting for 63.5% at the start of 2001.Given this, the National Bank was paying particular attention to thestate of credit portfolios of commercial banks.

Monetary Funds, Precious Metals and Jewels

Accounts with the National Bank

Correspondent Accounts with Commercial Banks

Securities Purchased by Banks

Credits (Having Regard to Past-Due Liability)

Other Placed Assets

Fixed Assets, Domestic Materials and Intangible Assets

Other Assets

Fig. 4.

BANKING SYSTEM STRUCTURE OF ASSETS

As of 01.01.2000 As of 01.01.2001

63.6%

11.4%

3.6%

5.2%1.6%

6.4%7.6% 0.7%

63.5%

13.4%

4.9%

4.2%1.9%

4.7%6.5% 0.9%

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In 1990, the Law “On the Banking System” and the Law “On theNational Bank” were passed. These regulatory acts formed the basis ofthe legal framework governing operation of the banking system of therepublic, even though the first commercial bank was established asearly as 1989.

Despite the brevity of the Belarusian banking system’s existence,several stages of development can already be defined therein.

The first stage (until 1993—1994) consisted in a rapid extensivegrowth. During that period, from five to ten (sometimes even more)banks were established each year, their total number by the end of1994 reaching 48. Banks were active in filling vacant niches of thebanking services market. The need for such services was rather high,especially on the part of a new non-government sector of the econo-my. At the same time, many of them had an insignificant financial,organizational and technological potential, their customer base wasvery narrow, in some cases, they were catering for provision of serv-ices to as few as one or two customers from among the shareholders.High nominal profitability of banking operations was ensured,chiefly, due to high inflation and a corresponding level of nominalinterest rates.

Such policy failed to assure sufficient security of banking activityand orientation towards enhancing fundamental factors of bankingeffectiveness. In addition, the initial period of banking system devel-opment was characterized by weak and undeveloped control andsupervision systems as well as regulatory and legal framework forregulating banking operations. This, naturally, led to the secondstage (1995—1996), during which many small- and even medium-sized banks became bankrupt while others either merged or wereabsorbed by larger banks.

In 1997—1998, the banking system began growing vigorously.Liquidation of weak banks continued. However, as a rule, this processwas under control. A. Klimov’s private bank, banks Rassvet and Intexwere liquidated under the direct supervision of the National Bank andwithout major consequences for customers (i.e. enterprises and citi-zens). Banks began to realize that the key to successful developmentwas not orientation towards realizing an immediate profit but mas-tering new banking technologies and types of services which meetcustomers’ requirements to the maximum extent possible.

Our banking system is, by and large, closer to the German one. Atpresent, its technological potential is experiencing qualitativeimprovement, state-of-the-art banking services are being assimilatedand, on this basis, the scope of banking operations is expanding.

3.2 BANKING SYSTEM DEVELOPMENT

77Today, a core of rather big structure-forming banks is available inthe republic. This is so-called “Big Seven”, including Belpromstroi-bank, Belvnesheconombank, Belagroprombank, Belarusbank, Prior-bank, Belorusskiy Bank Razvitiya and Belbiznesbank. These bankshave a rather large financial potential, a dense network of correspon-dent relations and are active in mastering progressive kinds of bank-ing operations and technologies.

Said banks have created provisions for doubtful debts, set up inter-nal audit services, their annual balance sheets and profit and lossstatements are verified by an external audit organization and are pub-lished in the press.

Since 2000, prudential norms have been calculated (in accordancewith international standards) on the basis of determining “two-tierbank capital”. On the whole, the system of safe functioning normsmeets the Basle Committee recommendations.

Many banking norms are set in the euro. For example, the mini-mum authorized fund for a bank in the process of establishment is inthe amount of EUR2 million (EUR5 million for joint and foreignbanks).

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In accordance with global tendencies, all payments are divided intogross and express payments (real time gross settlements in the BISSsystem) as well as others (effected on the clearing basis).

Interbank settlements for gross money transfers (whose minimumamount is defined by the National Bank) and express money transfers,regardless of their amount, both in respect of own payments of a bankor non-bank credit and financial institution (hereinafter referred toas the “bank”) and at the request of a bank’s customer are carried outthrough the BISS system. These transfers are made on the basis ofelectronic settlement documents, which contain all (including text)details pertaining to the source settlement documents, and are notaccompanied by an exchange of copies of paper settlement documents.Once accepted by the BISS system, electronic settlement documentsare considered irrevocable and are processed as they are received onthe “first in — first out” basis. Banks and their clients can use fundsas soon as the latter are placed to the respective accounts. Also effect-ed through the BISS system are interbank settlements based on theresults of other money transfers clearing (which is effected during theday in the clearing settlements system on the net basis), as well asinterbank settlements for securities trading transactions and foroperations involving bank cards.

Overall, 30.7 million payments worth BYB36.4 trillion wereeffected in 2000 through the automated system of interbank settle-ments (ASIBS), of which 3.1 million payments (10.3% of total pay-ments) worth BYB32.8 trillion (90.3% of the total amount) throughthe BISS system and 27.6 million payments (89.7%) worth BYB3.4trillion (9.7%) through the clearing settlements system. Comparedwith 1999, the total number of effected payments reduced by 7%,while the total amount increased by 170%. In 2000, the average dailyturnover amounted to 121.0 thousand payments (BYB143.3 billion)compared to 128.8 thousand payments (redenominated BYB53.4 bil-lion) in the previous year.

The main instrument of maintaining banks’ current liquidity(accounting for nearly 70%) is provision of non-directed credits of theNational Bank. Also, banks are actively utilizing (within the fixedlimits) resources of the required reserves fund, which are depositedfrom attracted resources in the national currency. This instrument isthe most efficient one.

The main payment instruments of non-cash payment turnover in2000 were payment orders and payment requests, accounting for77.4% and 16.3% in terms of quantity and 93.5% and 3.6% in termsof amount, respectively.

3.3 PAYMENT SYSTEM AND INSTRUMENTS DEVELOPMENT

79The National Bank attaches great importance to the introductioninto payment turnover of such progressive payment instrument asbank cards. At present, there are different settlement systems in theRepublic of Belarus which use bank cards as payment instrument: thenational system “BelCard”, international banking associations VISAand MASTERCARD/EUROPAY, and private cards systems. Today,12 banks of the Republic of Belarus issue plastic cards which are usedto pay for goods and services and to receive cash, and offer card serv-icing. Of these, 10 banks are “BelCard” members, three are VISAmembers and five are MASTERCARD/EUROPAY members.

As of January 1, 2001, banks issued nearly 84,000 bank cards, ofwhich more than 31,000 “BelCard” cards, more than 37,000 VISA andMASTERCARD/EUROPAY cards, and nearly 15,000 private bankcards. Over 1,000 trade and service enterprises accept bank cards aspayment for goods (services). Cards can be cashed in 550 encashmentcenters and in 70 automated teller machines. In 2000, the totalamount of issued bank cards almost doubled.

In 2000, in order to increase reliability and efficiency of the inter-bank settlement system, to minimize payment system risks and toaccelerate non-cash money turnover, upgrading of the republican pay-ment system continued. As part of these endeavors, interbank settle-ment procedures whereby interbank settlements for tradingGovernment and National Bank securities were carried out on a clear-ing basis were put in place. Implementation of these procedures madeit possible to carry out settlements of securities trading transactionsfollowing the “delivery versus payment” principle.

In order to improve the regulatory legal framework of the paymentsystem and due to the need for its modernization, the Board of theNational Bank worked out and approved the Rules for InterbankSettlements. This document determines general provisions for andprinciples of interbank settlements through the BISS and the clearingsettlement system, while the National Bank is authorized to carry outoffsetting in respect of electronic payment documents which are inthe waiting line pending arrival of funds to the banks’ correspondentaccounts. Besides, the Board of Directors of the National Bankworked out and approved the Instructions on the Organization ofFunctioning of the Automated System of Interbank Settlements of theRepublic of Belarus, which provide a mechanism for electronic trans-fer of funds through the ASIBS, using electronic payment documentsboth in the BISS and clearing systems, as well as the album of forms ofelectronic payment documents presentation used in the BISS andclearing systems.

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In order to ensure safety and registration of original electronicpayment documents pertaining to interbank settlements, the CentralArchive of interbank settlements of the National Bank of the Republicof Belarus was set up; in June 2000, the first part of its automatedsystem was commissioned.

International settlements are carried out through correspondentaccounts opened with non-resident banks by authorized banks of theRepublic of Belarus (nostro accounts) and through non-residentbanks’ accounts with Belarusian banks (loro accounts). As of January1, 2001, there were 1,686 nostro accounts and 713 loro accounts.Authorized banks are those banks that are in possession of theNational Bank’s master license to engage in foreign currency opera-tions. Procedures for performing international transactions both inforeign currency and in Belarusian rubles are governed by settlementarrangements between the National Bank and national (central) banksof foreign countries, by regulatory documents of the National Bankand by correspondent agreements between the authorized banks andtheir correspondent banks.

In carrying out international transactions in foreign currencies,correspondent accounts are debited in virtue of payment orders ofaccount holders. Banks direct payment orders to one another either bymeans of tested teletransmission messages or by post.

International transactions in Belarusian rubles are carried out viacorrespondent accounts of non-resident banks with authorized banks.In carrying out international transactions, Belarusian rubles corre-spondent accounts of non-resident banks are debited by authorizedbanks on the basis of payment orders of non-resident banks. Paymentorders and other messages associated with the movement of funds intoand out of correspondent accounts are directed by non-resident banksand authorized banks to each other through the S.W.I.F.T. system,telex, e-mail and other teletransmission facilities or by post.

Nowadays, foreign currency transfers from one Belarusian bank toanother are carried out through correspondent accounts of Belarusianbanks with other Belarusian banks, or through correspondentaccounts of authorized Belarusian banks with non-resident banks.

During 2000, the National Bank was working towards streamlin-ing the regulatory framework regulating the functioning of the inter-bank systems of money transfers and international transactions set-tlements.

In order to expand settlements using national currencies and toimprove the mechanism of settlements between Belarusian legal andnatural persons and Latvian and Lithuanian residents, the National

81Bank and the central banks of the above-mentioned states signedbilateral Settlement Arrangement Agreements.

To improve stock market information transparency through dis-closing information about securities-issuing banks, the Belarusianquotation automated system — open joint-stock company “BelarusianCurrency and Stock Exchange” was put in place on June 1, 2000.Using this system, investors receive, on a regular basis, informationconcerning quotation of Belarusian banks’ and enterprises’ shares.

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In the sphere of international cooperation, the National Bank ispursuing a multi-vector policy, strengthening relations with neigh-boring states, other countries and IFIs.

As regards cooperation with IFIs in 2000, relations with theInternational Monetary Fund (IMF) were considered as a matter ofpriority, since progress in establishing, maintaining and strengthen-ing sound relations with this institution is an indication of attrac-tiveness of the country’s economy for potential investors. Followingmeasures taken by the National Bank with a view to tightening mone-tary policy and liberalizing foreign exchange policy, primarily unifi-cation of the Belarusian ruble exchange rate, conditions for closercooperation with the IMF were created which became apparent in thebeginning of cooperation in the development of the Staff MonitoredProgram designed to monitor the economic situation and reform poli-cy in the republic, which, if successful, could serve as a basis forpreparing a Standby Arrangement.

In 2000, the World Bank brisked up its activities to resume loansupport under the “Energy Conservation” project, to establish a sys-tem of targeted social protection, as well as to assist in the develop-ment and implementation of a program instituting efficient controlover the spread of tuberculosis and AIDS in the republic. Given grow-ing cooperation with the IMF, the World Bank decided to devise a newCountry Assistance Strategy for Belarus.

Cooperation with the European Bank for Reconstruction andDevelopment (EBRD) was realized as part of the EBRD line of creditfor small- and medium-size business development in the country andparticipation in drafting EBRD strategy for Belarus. However, thenew strategy has not been approved so far by the EBRD’s Board ofDirectors.

During 2000, the National Bank, in concert with the Bank ofRussia, was focusing its efforts on the unification of principles andmechanisms of monetary policy of Belarus and Russia. Four meetingsof the Interbank Currency Council were held, each of them resultingin crucial decisions in this area.

The principal outcome of cooperation in the field of currency inte-gration in 2000 was the drafting (in accordance with the Union StateAgreement and the Plan of Actions of the Republic of Belarus and theRussian Federation intended for Agreement implementation) by theNational Bank and the Bank of Russia of the Inter-state Agreementon the introduction of a single currency and establishment of a singlecenter of issue as well as the Inter-Government Agreement on cre-ation of the environment favorable for the introduction of a single

3.4 INTERNATIONAL COOPERATION

83currency. The above-mentioned documents were signed at the meet-ing of the Supreme State Council of the Union State on November 30,2000.

Implementation of agreements reached at the meetings of theInter-bank Currency Council made it possible to set a single exchangerate of the Belarusian ruble, to remove restrictions on the use of theBelarusian ruble in payments for exports and imports and to bringrefinancing rates and reserve requirements ratios in Belarus andRussia closer. As from January 1, 2001, the National Bank began topeg the Belarusian ruble to the Russian ruble.

On December 15, 2000, the National Bank and the Bank of Russiasigned the Agreement on opening a line of credit in the amount ofRUR4.5 billion and the Agreement on granting a credit by the Bank ofRussia in the amount of RUR1.5 billion. At present, coordination oftechnicalities related to the granting of the credit is being completed.The credit will be granted after Belarusian and Russian parliamentsratify the Inter-state Agreement on introduction of a single currencyand establishment of a single center of issue.

Cooperation with the central banks of other states (Lithuania,Latvia, Poland, China) was developing as well.

The National Bank was also actively cooperating with the centralbanks of the Eurasian economic community and the Commonwealth ofIndependent States. The Agreement on the Council of Governors ofthe central (national) banks representing the states that are partici-pants of the Eurasian Economic Community Treaty dated October 10,2000, is being prepared for signing.

MONETARY POLICY

GUIDELINES

FOR 2001

4

87The principal objectives of monetary policy of the Republic ofBelarus and National Bank activities are to protect and provide sta-bility of the Belarusian ruble, including its purchasing power andexchange rate in relation to foreign currencies, to develop andstrengthen the banking system of the Republic of Belarus and tosecure effective, sound and safe functioning of the payment system.

Being a constituent part of the economic policy whose main tasksare the consolidation and development of stable economic growthtrends, increase in the living standard and reduction of inflation,monetary and foreign exchange policies of the Republic of Belarus in2001 are directed towards implementation of the Forecast of coun-try’s socio-economic development for 2001, Law of the Republic ofBelarus “On the Year 2001 State Budget of the Republic of Belarus”,Agreement between the Republic of Belarus and the RussianFederation on introduction of a single currency and establishment ofa single center of issue of the Union State and Agreement between theGovernment of the Russian Federation, the Central Bank of theRussian Federation, the Government of the Republic of Belarus, andthe National Bank of the Republic of Belarus on creation of the envi-ronment for the introduction of a single currency.

To ensure macroeconomic and financial stability, monetary andforeign exchange policies of the Republic of Belarus in 2001 will beaiming at restraining inflationary developments via monetary factorsat a level not exceeding 2.5% per month on average. In the short-term, inflationary developments were substantially affected by fac-tors that are beyond monetary policy, such as tariff and tax policies,policy of regulating prices for socially important goods and prices ofnatural monopolies, a gap between prices on the world and domesticmarkets for some types of energy resources.

The primary objective of monetary policy in 2001 is to securesmooth, predictable dynamics of a single (unified) exchange rate ofthe Belarusian ruble in all the segments of the foreign exchange mar-ket. Setting the maintenance of the desired dynamics of theBelarusian ruble exchange rate as a priority task in 2001 implies thatthis task is decisive with respect to other monetary policy tasks.Hence, all most important means and instruments of monetary policy(money supply in Belarusian rubles, interest rates, reserve require-ments, etc.) will be set at the levels and in proportions that ensure theachievement of the projected dynamics of the Belarusian rubleexchange rate.

Exchange rate policy in 2001 is the key issue of monetary policy.Due to the fact that foreign economic relations between the Republic

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of Belarus and the Russian Federation are broad in scope, the policy ofpegging the Belarusian ruble to the Russian ruble, which is the con-tinuation of the “crawling peg” policy implemented in 2000, meets theinterests of economic development of the Republic of Belarus in thegreatest degree. Restriction of monetary indicators rate of growthand, above all, money supply in Belarusian rubles, as well as mainte-nance of favorable real interest rates on the money market is of par-ticular importance for the implementation of the above-mentionedpolicy. Compliance with these requirements will necessitate consider-able convergence of macroeconomic parameters in the development ofthe Belarusian and Russian economies. Pegging to the Russian rubleis also determined by the creation of necessary conditions for theintroduction of a single currency in the Union State of the Republic ofBelarus and the Russian Federation. In this connection pegging to theRussian ruble will remain the task of monetary policy of the Republicof Belarus not only in 2001 but also in the medium term — until a sin-gle currency unit of the Union State is introduced. The basis for itsimplementation should be the fixing of relation of the market nominalexchange rate of the Belarusian ruble to the Russian ruble and its sub-sequent maintenance at the level ensuring stability of the realexchange rate of the Belarusian ruble versus the Russian ruble.

The policy of pegging the Belarusian ruble to the Russian rublewill be implemented in the “inclined band” regime that provides forrecurring (quarterly) setting of the central rate and the range of itsfluctuations (upper and lower limits) and for attainment of its speci-fied level at the end of 2001. The immediate mechanism for adjustingthe exchange rate of the Belarusian ruble versus the Russian rublewill be changes in the nominal exchange rate of the Belarusian rublehaving regard to the difference in the rates of inflation in both coun-tries. Based on the need for initiating growth of goods and servicesexport and reduction of their import (as the most important means ofdecreasing an unfavorable foreign trade balance of the Republic ofBelarus by means of depreciation of the real exchange rate of theBelarusian ruble), it is envisaged that in 2001 the exchange rate of theBelarusian ruble will be depreciating versus the Russian ruble at 2%per month on average, which is equal to the depreciation of theexchange rate of the Belarusian ruble versus the US dollar up to2.7%, with inflation rates not exceeding 2.5% per month on average.

In 2001, state regulation of the exchange rate will be directed atthe establishment and maintenance of the exchange rate of theBelarusian ruble which is optimal for the economy, facilitates the set-tlement of an unfavorable foreign trade balance, growth of goods and

89services export, accumulation of the state’s gold and foreignexchange reserves as well as at opposition to speculative attacks onthe Belarusian ruble by resorting to short-term measures of monetarypolicy, including foreign exchange interventions. Actions of theNational Bank aimed at regulating the exchange rate of theBelarusian ruble will mainly include smoothening of the range of fluc-tuations of its exchange rate during short-term periods.

In implementing the policy of pegging the exchange rate of theBelarusian ruble to the Russian ruble, corresponding flexibility in theexchange rate policy will be permitted, which makes it possible to takeaccount of the macroeconomic situation and the level of gold and for-eign exchange reserves.

Measures required for the Republic of Belarus to join Article VIIIof the IMF Articles of Agreement will be implemented. MaintainingBelarusian ruble convertibility in carrying out balance of paymentscurrent transactions along with predictable dynamics of theBelarusian ruble exchange rate will have a positive effect on thestructure of export-import operations, increasing the share of settle-ments in the monetary form, with the sphere of Belarusian ruble uti-lization in foreign trade expanding. The National Bank will proceedwith measures aimed at dedollarization of the economy and narrowingthe sphere of foreign currency circulation within the country.

In achieving the objective and tackling the primary task of mone-tary policy, forming the most important monetary indicators inBelarusian rubles and net foreign assets of monetary authorities inthe required parameters as well as ensuring favorable real interestrates on the money market will be of particular significance in 2001.The National Bank will perform specific operations having regard toemerging trends in the development of the economy and monetarysphere (including real and nominal GDP characteristics), foreigntrade conditions and world prices, trade balance and balance of pay-ments, gold and foreign exchange reserves, exchange rate, situationon the money and foreign exchange markets as well as evaluation offorecasting factors that may considerably affect changes in prices andthe Belarusian ruble exchange rate both in the short and longer term.

The need for a considerable reduction in 2001 (compared with2000) of the pace of Belarusian ruble exchange rate depreciation andprice growth will require restriction of growth rates of monetary indi-cators in Belarusian rubles.

In addressing the primary task, i.e. maintaining the Belarusianruble exchange rate at a specified level, monetary indicators inBelarusian rubles are indicative. However, since the Belarusian ruble

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exchange rate and inflation depend on money supply in Belarusianrubles, monetary parameters should, in the course of monetary policyimplementation, be maintained at certain levels.

To avoid generation of a devaluation and inflationary potential in2001 which may result in depreciation of the Belarusian rubleexchange rate versus the Russian ruble by more than 2%, versus theUS dollar by more than 2.7% and a decline of the consumer priceindex (CPI) by more than 2.5% per month on average, the ruble moneysupply may increase by no more than 342.1 billion rubles (3.5% permonth on average). In this connection, the money supply is still one ofthe most important indicators in the system of measures used by theNational Bank in the course of monetary policy implementation.

Likely excess of growth rates of the money supply in Belarusianrubles (51.3% per year) over the rates of Belarusian ruble exchangerate depreciation (37.3% per year) and an increase in the CPI (35.1%per year) is based on the assumption that a real demand for money in2001 will increase. The increase should be due to faster real GDPgrowth with respect to that stipulated in the Forecast of socio-eco-nomic development of the Republic of Belarus in 2001, reduction ofbarter trade and an increase in settlements in the monetary form, ahigher share of households’ savings and enterprises’ accumulations inBelarusian rubles, a reduction of money circulation velocity due todeclining inflation rates, and other factors.

In 2001, formation of net foreign assets of monetary authoritieswill be affected by a number of factors. Their growth (by USD20.8million) results from the reduction by USD30.5 million of theGovernment obligations to the IMF, the stabilization credit grantedby the Bank of Russia to the National Bank in the amount of RUR4.5billion and their increase by USD6.7 million at the expense of othersources (interest income in foreign currency, increase of the requiredreserves fund in foreign currency, etc.).

Internal sources of forming foreign assets by means of purchasingforeign currency by the National Bank will be restricted, because theissue of money will be used by the National Bank to finance the repub-lican budget deficit. An increase in foreign assets by means of sellingshares and other state property for foreign currency will be problem-atic too.

The scope of changes in foreign assets due to interventions of theNational Bank on the foreign exchange market aimed at maintainingthe specified dynamics of the Belarusian ruble exchange rate willdepend on the demand for and supply of foreign currency. If moneysupply in Belarusian rubles increases by 59.1% and if there is an addi-

91tional real increase in demand for money, foreign exchange interven-tions in 2001 needed to maintain the specified dynamics of theBelarusian ruble rate are estimated to be at USD16.3 million. If theincrease in the ruble money supply is larger, then bigger foreignexchange interventions will be required. If the supply of foreign cur-rency exceeds the demand for it, then foreign exchange interventionswill not be carried out and it will be possible to increase the net foreignassets by means of purchasing foreign currency by the National Bank.

Monetary policy instruments will also be used to ensure the speci-fied exchange rate of the Belarusian ruble. Special role is given to theinterest rate policy. Its main target is to create conditions for secur-ing sustained excess of the yield on operations in Belarusian rublesover the yield on the assets in foreign currency with the interest ratelevel being positive in real terms. This target will be achieved bymeans of proper adjustment of the base refinancing rate and interestrates in respect of National Bank’s money market operations.

In 2001, the approaches to the establishment of the reserverequirements that were developed in 2000, will be generally retained.The main provision for required reserves creation in respect ofresources attracted by banks in Belarusian rubles, will still be themechanism of the averaged maintenance of the required volume ofreserves during a month. It will allow the banks to use on a non-issuebasis a portion of the reserve fund for adjusting their current liquidi-ty which will contribute to the smoothening of fluctuations of banks’liquid resources and interbank credit interest rates. Where required,the reserve requirement ratio can be used as a monetary regulationinstrument to maintain the money supply and banks’ current liquidi-ty at levels that secure the achievement by the Belarusian rubleexchange rate of specified parameters. During 2001, the level ofreserve requirements achieved at the end of 2000 will be maintained.At the same time, some banks will not receive additional privileges inrespect of reserve requirements.

The National Bank intends to provide in 2001 a limited resourcesupport to banks under the terms that are appropriate to borrowingfrom the creditor of last resort, whose resources can be used only incase of critical shortage of liquidity in the banking system as a whole.

It is stipulated that in 2001 banks will be developing with a viewto securing their financial soundness, stable and safe functioning andachieving international standards of banking supervision. A very par-ticular dimension will be added to measures securing sustainedenhancement of reliability of the national banking system in generaland of each individual bank in particular. This will be achieved

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through timely determination and adoption by the National Bank ofsupervisory measures in relation to problem banks, as well as restruc-turing of problem banks. It is envisaged that regulation of banksactivity and supervision of banks by the National Bank will beimproved by using modern methodological approaches and instru-ments, such as means of early warning of problem situations in banks,increasing the level of transparency of banks and non-bank credit andfinancial institutions, development of cross-border supervision, con-sistent application of banking supervision standards to all banks with-out exception, etc.

In 2001, banks will continue to build up their equity and to expandtheir resource base by attracting funds from legal entities and thegeneral public. Improvement of banks’ financial standing should bebased on the enlargement of banks’ active operations in the real sectorof the economy and on an increase of the share of credit and invest-ment operations. Structural reorganization of banks will be realizedby speeding up withdrawal of problem banks from the banking systemand transfer of the National Bank’s share in the banks’ authorizedfunds to the Government of the Republic of Belarus.

Implementation of measures with a view to strengthening thebanking system which are scheduled for 2001 should enhance attrac-tiveness of Belarusian banks for foreign and domestic investors andstrengthen households’ interest in keeping their savings withBelarusian banks.

It is anticipated that accounting in banks will be developing byimproving methodological support for banking accounting and usinginternational accounting standards that are based on the national andinternational accounting standards.

In 2001, efforts aimed at further development of the regulatoryand legal framework of the national payment system and of non-cashsettlements methodology, integration of the Belarusian and Russianpayment systems and increasing the share of non-cash settlements inthe overall structure of payments flow by implementing in theRepublic of Belarus a Program of gradual introduction of the non-cash settlements system based on the use of bank cards will be contin-ued. In order to ensure a sound and reliable process of settlements andpayments among participants of foreign economic activities, interna-tional settlements methodology and arrangement will continue devel-oping.

As regards functioning of the national payment system in 2001,the most important task is to secure a high degree of its safety, oper-ational reliability and effectiveness. To this end, further upgrading

93of the ASIBS technical infrastructure, establishment of the back-upand archiving system, improvement of monitoring mechanisms, pay-ments administration, the rules of and procedures for liquidity andrisk management in the payment system will continue. Work on intro-duction of obligatory certification of software and hardware used inthe national payment system will commence.

In 2001, development of the securities market, improvement of itslegal framework, infrastructure and instruments for mobilization ofboth internal and external sources of financing the republican budgetdeficit will be carried on.

With a view to identifying additional sources of financing therepublican budget deficit, the Government and the National Bank willendeavor to improve Government securities placement on externalmarkets and to attract non-resident investors’ funds to theGovernment securities market of the Republic of Belarus. The mainrequirements for ensuring implementation of the above-mentionedmeasures will be: securing positive real yield of Government securi-ties and implementation by the National Bank of a predictable andtransparent policy of national foreign exchange market development.

In order to maintain liquidity of the banking system and to regu-late the level of interest rates, securities market operations, includingoperations with Government securities and legal entities’ bills/notes,will continue. To improve the system of banking risk managementwhen investing in securities, methods of the above-mentioned risksevaluation will be devised and procedures for establishing reservesagainst securities depreciation will be defined.

In order to increase the inflow of foreign investments into theBelarusian economy, the organized stock-exchange market of corpo-rate and municipal securities will be developing.

In 2001, the main task of the National Bank in the field of cooper-ation with IFIs and central banks of foreign states will be to enhanceconfidence in monetary and foreign exchange policies of the Republicof Belarus as a basis for achieving a higher credit rating of the coun-try on the international capital markets.

As part of implementation of the Union State Agreement, theNational Bank will continue close cooperation with the Bank ofRussia in the field of gradual establishment of most favorable condi-tions for the introduction of a single currency and setting up of a sin-gle center of issue. This will be achieved by coordinating at meetingsof the Interbank Currency Council of the main objectives and instru-ments of monetary and foreign exchange policies of the Republic ofBelarus and the Russian Federation.

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Cooperation with the Inter-state Bank and central banks of the CIScountries and, above all, with the member countries of the CustomsUnion will be aimed at expanding the use of the Belarusian ruble andnational currencies of other countries in foreign trade settlements.

In 2001, the National Bank will be endeavoring to reach agree-ments with the IMF, the World Bank and the EBRD on the resumptionof financial resources provision to the Government of the Republic ofBelarus designed to support economic reform and to expand the vol-ume of credits to real sector enterprises as part of the current EBRDline of credit.

LIST OF COMMERCIAL

BANKS REGISTERED

IN THE NATIONAL BANK

OF THE REPUBLIC OF BELARUS

AS OF MAY 1, 2001

5

No NAME Numbr Of ADDRESS CHAIRMANTel/.Fax Licence for Foreign

(Date of Registration) BranchesTTeelleexx Exchange Operations/

S.W.I.F.T. Registration Number

1. Open Joint-Stock Company 24, Olshevskiy St., Mr. Alexander 228-50-01/228-53-19 General“BELAGROPROMBANK” 132 Minsk, 220073 A.Gavrushev 252514 20

(September 03, 1991) BAPB BY 2X

2. Open Joint-Stock Company 6, Lunacharskiy Ave., Mrs. Galina 213-39-93/231-44-76 General“BELPROMSTROIBANK” 58 Minsk, 220678 P. Kukhоrenko 252410 AVAL 25

(December 28, 1991) BPSB BY 2X

3. Open Joint-Stock Company 32, Myasnikov St., Mrs. Nadezhda 289-10-90/226-47-50 General“SAVINGS-BANK “BELARUSBANK” 172 Minsk, 220050 A. Yermakova 252408 PION BY 56

(October 27, 1995) AKBB BY 2X

4. Open Joint-Stock Company 81, Varvasheni St., Mr. Kazimir 289-35-42/289-35-46 General“BELBIZNESBANK” 44 Minsk, 220002 V. Turuto 252512 BELBB BY 28

(September 1, 1992) BLBB BY 2X

5. Open Joint-Stock Company 2, Melnikaite St., Mr. Alexander 223-93-96 General“BELORUSSKIY BANK RAZVITIYA” 7 Minsk, 220004 Ye. Rutkovskiy 223-93-96 32

(November 05, 1993) 252690 BELIB BY

6. “PRIORBANK” 31-A, V. Khoruzhey St., Mr. Sergey 217-34-01/234-15-54 GeneralOpen Joint-Stock Company 29 Minsk, 220002 A. Kostyuchenko 252268 PRIOR BY 12

(July 12, 1991) PJCB BY 2X

7. Open Joint-Stock Company 32, Myasnikov St., Mr. Georgiy 223-09-48/226-48-09 General“BELVNESHECONOMBANK” 28 Minsk, 220050 A. Egorov 252426 BYB BY 24

(December 12, 1991) BELB BY 2X

8. Open Joint-Stock Company 9/4, Gamarnik St., Mr. Algerdas 228-32-50/228-32-48 General“BANK “POISK” 4 Minsk, 220090 N. Tabatadze 252455 RANET 5

(May 15, 1991) POIS BY 2X

9. Open Joint-Stock Company 1а, M.Tank St., Mr. Andrey 226-78-83/223-84-57 General“BELORUSSKIY NARODNY BANK” – Minsk, 220004 S. Taratukhin 64914418 BNB RY 27

(April 16, 1992) BLNB BY 2X

10. Open Joint-Stock Company 8, Melnikaite St., Mr. Andrey 229-26-24 General“BELORUSSKIY INDUSTRIALNY BANK” 5 Minsk, 220004 E. Kireev 222-26-17 23

(October 30, 1991) 252485 PRB BY

11. Belorussian-Russian Open 60/2, Pritytskiy St., Mr. Victor 259-40-24 GeneralJoint-Stock Company Minsk, 220121 D. Babariko 259-45-25 16“BELGAZPROMBANK” 6 252104 OLIMP BY

(August 19, 1991) OLMP BY 2X

12. Closed Joint-Stock Company 115, F.Skorina Ave., Mr. Andrey 264-24-43 General“ABSOLUTBANK” 1 Minsk, 220023 G. Shkirich 264-24-43 34

(December 29, 1993) P.O. Box 9 252696 ABSOL BY

13. Open Joint-Stock Company 28, Surganov St., Mr. Alexander 268-81-15/268-81-90 General“DJEM-BANK” – Minsk, 220012 V. Tatarintsev 252219 DJEM BY 18

(August 26, 1991) DJEM BY 22

14. Open Joint-Stock Company 48-a, Surganov St., Mr. Sergey 231-99-24 General“BELORUSSKIY BIRZHEVOY BANK” 7 Minsk, 220013 P. Zelenko 232-67-00 29

(October 07, 1992)

15. “Joint-Stock Commercial Bank 40, Myasnikov St., Mr. Evgeniy 228-16-08 General“MINSKCOMPLEXBANK” – Minsk, 220050 I. Kravtsov 228-20-60 36Closed Joint-Stock Company 252403 PLEX BY

(February 21, 1994)

16. Closed Joint-Stock Company 23/1, Masherov Ave., Mrs. Andrey 223-57-27 General“Joint-Stock Bank for Reconversion 1 Minsk, 220004 B. Veretelnikov 226-63-93 37and Development” (“RRB-BANK”)

(February 22, 1994)

17. Closed Joint-Stock Company 6-A, Partizanskiy Ave., Mrs. Anna 213-29-00/213-29-09 General“MINSKIY TRANZITNY BANK” 5 Minsk, 220033 G. Grinkevich 252157 MTB BY 38

(March 14, 1994) MTBK BY 21

18. Closed Joint-Stock Company 8, Roussiyanov St., Mr. Felix 268-03-45 General“TRADE AND INDUSTRIAL BANK” – Minsk, 220141 I. Chernyavskiy 268-03-45 40

(April 1, 1994)

19. Open Joint-Stock Company 44, Kropotkin St., Mrs. Zoya 283-27-27 General“TEKHNOBANK” 4 Minsk, 220002 I. Lishay 283-15-10 47

(August 5, 1994)

20. Open Joint-Stock Company 3, Tatarskaya St., Mr. Alexander 226-62-98 GeneralBANK “ZOLOTOY TALER” – Minsk, 220035 A. Zhilinskiy 223-06-40 50

(October 5, 1994) 252106 TALER BY

21. Closed Joint-Stock Company 11, Ignatenko St., Mr. Alexander 223-24-67 General“Joint-Stock Commercial 4 Minsk, 220035 D. Osmolovskiy 250-43-88 53Bank “INFOBANK” 252183 INFO BY

(November 09, 1994) INFB BY 21

22. Closed Joint-Stock Company 8, Fabritsius St., Mr. Vladimir 222-07-09 General“SLAVNEFTEBANK” 2 Minsk, 220007 V. Ivanov 222-07-52 57

(October 07, 1996) 252670 SNB

23. Closed Joint-Stock Company 12, Sovetskaya St., Mr. Gennadiy 220-68-80 General“BANK FOR INTERNATIONAL – Minsk, 220050 S. Aleinikov 220-17-00 58TRADE AND INVESTMENTS”

(January 28, 1999)

24. Unitary Enterprise 49, Kommunisti- Mr. Alexander 228-63-01 General“ FOREIGN BANK “MOSKVA - MINSK” – cheskaya St., A. Rakovetz 228-63-02 59

(April 7, 2000) Minsk, 220002 807000002

25. Closed Joint-Stock Company 174, Partizanskiy Ave., Mr. Sergey 268-81-38 N/A“ATOM-BANK” – Minsk, 220075 V. Misitov 60

(January 25, 2001) 807000015

INDEPENDENT

AUDITORS’

REPORT

6

101To the Board of the National Bank of the Republic of Belarus:

We have audited the accompanying balance sheet of the NationalBank of the Republic of Belarus (the Bank) as of 31 December 2000and the related statements of profit and loss and statutory fund andreserves for the year then ended. These financial statements are theresponsibility of the Bank’s management. Our responsibility is toexpress an opinion on these financial statements based on our audit.

We conducted our audit in accordance with InternationalStandards on Auditing. Those standards require that we plan and per-form the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amountsand disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial state-ment presentation. We believe that our audit provides a reasonablebasis for our opinion.

As disclosed in Note 2, International Accounting Standard (IAS)29 “Financial Reporting in Hyper-inflationary Economies” was firstapplied in the year 2000. Financial statements for the year ended 31December 1999 have not been restated in accordance with this stan-dard. The management believes that for the purposes of the financialstatements for the year ended 31 December 2000 it would be imprac-tical to restate comparative balances retrospectively. Accordingly,the management did not disclose those comparative balances in thefinancial statements for the year ended 31 December 2000 becauseshould those balances have been presented they would not be compa-rable with amounts for 2000. International Accounting Standard(IAS) 1 “Presentation of Financial Statements” requires that compar-ative information should be disclosed in respect to the previousreporting year for all numerical information.

In our opinion, except for the omission of comparative financialinformation for the year ended 31 December 1999 resulting in anincomplete presentation, as explained in the preceding paragraph, thefinancial statements present fairly, in all material respects, the finan-cial position of the Bank as of 31 December 2000 and the result of itsoperations for the year then ended in accordance with InternationalAccounting Standards modified for generally accepted accountingpolicies applicable to national central banks.

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Without qualifying our opinion, we draw attention to Notes 2 and26, describing the fact that at present there is a considerable degree ofuncertainty in the Republic of Belarus surrounding the continuedsuccess of domestic economic policy.

D e l o i t t e & T o u c h e

Minsk, Belarus15 March 2001

Национальный банк Республики Беларусь

220008, Минск, пр-кт Ф.Скорины, 20.

Тел.: (375 17) 227-64-31Факс: (375 17) 227-48-79

Редактор: Анатолий Тихонов

Верстка: издательский центр

Национального банкаДизайн:

Александр Бельский

Типография ОАО “Транстэкс” Заказ № 513