BELARUS NEWS AND ANALYSIS

DATE:

02/01/2009

Belarusian Central Bank Introduces Currency Basket

By Katya Andrusz and Daryna Krasnolutska

Jan. 2 (Bloomberg) -- The Belarusian central bank pegged its ruble to a currency basket for the first time and raised its benchmark interest rate to shore up the teetering economy as the global financial crisis batters Europe's emerging markets.

The currency basket, similar to one introduced in Russia in 2005, is divided equally into dollars, euros and Russian rubles, the Natsionalnyi Bank Respubliki Belarus said on its Web site. It devalued the Belarusian ruble to 2,650 per dollar from 2,200 and to 3,703 rubles against the euro from 3,077. The currency trades at 90.16 against the Russian ruble, compared with 76.89 on Dec. 31.

Belarus, like other emerging economies in eastern Europe, is feeling the pinch of turmoil in global financial markets that is shaking economies and weakening currencies. The former Soviet republic followed Ukraine, Hungary and Latvia in turning to the International Monetary Fund for financial support.

"The new ruble rate safeguards the strong competitiveness of the Belarusian economy, which is extremely important amid the global economy crises" the Minsk-based central bank said. "The new mechanism will help manage the ruble more effectively against the foreign currencies that are the most important to Belarusian trade."

Belarusian President Aleksander Lukashenko, who has maintained a mostly centrally run economy in the 14 years of his rule, similar to that used in the former Soviet Union, has sought to open the country of 10 million toward the West over the last year while keeping close relations with its eastern neighbor, Russia.

Currency Fluctuation

The central bank will allow the currency to fluctuate by 5 percent in either direction against the two western currencies and the Russian ruble.

The IMF, which on Dec. 31 approved a $2.5 billion credit line to help Belarus weather the global financial crisis, will provide the first $800 million this month, according to the statement. The central bank will inject the capital into its gold and foreign currency reserves, which stood at $4.47 billion as of Dec. 1, the statement said. The bank will decide to raise its key refinancing rate to 14 percent from 12 percent, effective on Jan. 8.

Source:

http://www.bloomberg.com/apps/news?pid=20601085&sid=axdL1Rk5eAwo&refer=europe

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