In the summer of 1995, the Belarussian president announced the policy of "market socialism," after a period of economic liberalization and privatization that had taken place from 1991–94. The government still controls key market sectors as the private sector only makes up 20% of the economy. Most of the heavy industry in Belarus remains state-owned. Belarus offers easy credit to spur economic growth, but this comes at the price of high inflation. To combat spiraling wages and prices, President Lukashenko imposed price controls. These policies have driven away foreign investment and left Belarus economically isolated.
Bad harvests in 1998 and 1999, and continued trade deficits worsened the climate of economic development. The government resorted to inflationary monetary policies, including the printing of money, to pay salaries and pensions. In 2000, the government tightened its monetary policies, but in 2002, the International Monetary Fund (IMF) criticized Belarus for its economic performance, and refused to resume loans to the country. (IMF loans were last offered in 1995.) The balance of payments situation remained weak from 2001–03, as the rubel rose against the US dollar and the Russian ruble. The current account deficit was $279 million or 2% of gross domestic product (GDP) in 2003. There were plans in 2003 for monetary and currency union with Russia, which would require substantial macroeconomic reforms on the part of Belarus.