After an initial outburst of capitalist reform from 1991-94, including privatization of state enterprises, creation of institutions of private property, and entrepreneurship, Belarus under Lukashenko has greatly slowed its pace of privatization and other market reforms, emphasizing the need for a "socially oriented market economy." About 80% of all industry remains in state hands, and foreign investment has been hindered by a climate hostile to business. The banks, which had been privatized after independence, were renationalized under Lukashenko.

Economic output, which declined for several years, revived somewhat in the late 1990s, but the economy remains dependent on Russian subsidies. Until 2000, subsidies to state enterprises and price controls on industrial and consumer staples constituted a major feature of the Belarusian economy. Inflationary monetary practices, including the printing of money, also have been regularly used to finance real sector growth and to cover the payment of salaries and pensions.

Peat, the country's most valuable mineral resource, is used for fuel and fertilizer and in the chemical industry. Belarus also has deposits of clay, sand, chalk, dolomite, phosphorite, and rock and potassium salt. Forests cover about a third of the land, and lumbering is an important occupation. Potatoes, flax, hemp, sugar beets, rye, oats, and wheat are the chief agricultural products. Dairy and beef cattle, pigs, and chickens are raised. Belarus has only small reserves of petroleum and natural gas and imports most of its oil and gas from Russia. The main branches of industry produce tractors and trucks, earthmovers for use in construction and mining, metal-cutting machine tools, agricultural equipment, motorcycles, chemicals, fertilizer, textiles, and consumer goods. The chief trading partners are Russia, Germany, Ukraine, and Poland.

The massive April 26, 1986 nuclear accident at the Chernobyl power plant, across the border in Ukraine, had a devastating effect on Belarus; as a result of the radiation release, agriculture in a large part of the country was destroyed, and many villages were abandoned. Resettlement and medical costs were substantial and long-term.

In 2000, Belarus managed to unify its currency exchange rates, tightened its monetary policy, and partially liberalized the foreign currency market. These developments led to the conclusion of a staff-monitored program in cooperation with the IMF, addressing, among other topics, price and wage liberalization, a widening of privatization, fiscal reform, the adoption of international accounting standards in the banking sector, and the repeal of several egregious laws and decrees to improve the investment climate. The program was conducted between April and September 2001, with relatively disappointing results.

Due to the economic and political climate, little new foreign investment occurred in 2003. In 2002, two major companies, the Swedish furniture firm Ikea and Russian beer producer Baltika, ended operations in Belarus due to unrealized government commitments or unwelcome interference. The government itself faced increasing fiscal difficulties as arrears rose in wages and pensions, and in tax payments.

Growth in 2003 and early 2004 was reportedly robust, but peculiarities in official Belarusian statistics complicate analysis. Inflation remained highest in the region despite a modest decline to 18% in early 2004. Over 40% of enterprises and a majority of collective farms currently operate at a loss, a level that has persisted since 2002. The government made progress in reining in its fiscal policies, largely due to constraints imposed by financial difficulties caused by the earlier economic slowdown. Belarus continues to be heavily dependent on Russia, with the potential for greater economic dependency looming in the proposed European Union (EU)-style union between the two states. Prospects for an eventual union appear diminished, however, largely due to the apparent lack of interest on the part of Belarus.

The World Bankís 2002-2004 country assistance strategy for Belarus focused on areas such as targeted social assistance to help open up Belarusian society, AIDS/HIV and tuberculosis prevention, environmental protection, Chernobyl-related damage, and small and medium enterprise development. The World Bankís most recent project in Belarus began with its June 2001 approval of a $22.6 million loan to finance repairs in over 450 schools, hospitals, and homes for orphans, the elderly, and the disabled throughout Belarus. In 2004, Belarus rejected a World Bank loan to help fight AIDS and tuberculosis. IMF cooperation is currently limited to policy and technical consultations.