BELARUS NEWS AND ANALYSIS

DATE:

23/06/2009

Belarus Expects to Receive $2 Billion in Aid From IMF This Year

By Paul Abelsky

June 23 (Bloomberg) -- Belarus expects to receive $2 billion from the International Monetary Fund before the end of this year to replenish reserves and stabilize its currency, President Alexander Lukashenko said.

The central bank yesterday widened its exchange-rate band for the ruble to 10 percent of its target basket of dollars, euros and Russian rubles, Governor Pyotr Prokopovich told Lukashenko, according to a statement published on the president's Web site late yesterday.

The former Soviet state, whose pipelines handle a fifth of Russia's natural-gas shipments to Europe, is seeking new sources of foreign currency after investors fled emerging markets during the credit crisis and the global recession sapped demand for exports of heavy machinery, fertilizers and oil products.

"The widening of the band increases the flexibility of the exchange-rate regime, which will make it easier for Belarus to absorb external shocks," the IMF, which earlier this month said it may increase its loan to Belarus by $1 billion after approving a $2.5 billion package in January, said in a statement yesterday.

Belarus' short-term debt was 290 percent of its reserves, the World Bank said yesterday, predicting that its economy will contract 3.3 percent this year and the current-account deficit will reach 7.8 percent of gross domestic product.

Insufficient Reserves

Belarus' reserves, calculated under IMF standards, were $3.24 billion as of June 1, according to the central bank. The stockpile has declined more than 29 percent from the same time last year, falling to less than a third of the country's target of $10 billion. The total covered less than a month and a half of imports, the smallest level among all the developing nations surveyed by the World Bank, including Malawi and Sri Lanka.

The economy expanded 1.4 percent during the first five months of the year as corporate lending advanced 17 percent and bank deposits rose 19 percent in the period, Prokopovich told Lukashenko. The Belarusian ruble will remain at the current level for "at least one month," Prokopovich said.

The decision to widen the exchange-rate band was made to better manage the currency's swings after the Belarusian ruble reached the upper threshold against the basket, he said.

IMF Bailouts

The IMF, which has rescued economies from Iceland to Pakistan in the past year, gave Belarus $800 million in 2009 and said on June 10 that the fund's board recommended an additional immediate disbursement of about $675 million.

Russia lent Belarus $1.5 billion last year and $500 million this year. Russian Finance Minister Alexei Kudrin earlier this month said Belarus will need to borrow at least $3.7 billion in the second half of this year to stay solvent.

European Union External Relations Commissioner Benita Ferrero-Waldner, who met Lukashenko in the capital Minsk yesterday, said the EU would offer financial assistance and negotiate a free trade agreement with Belarus if its government embraced democratic values and reforms institutions.

EU leaders last month approved the Eastern Partnership program, worth at least 600 million euros ($830 million) in aid for six ex-Soviet republics, including Belarus.

Lukashenko, dubbed "Europe's last dictator" by the administration of former U.S. President George W. Bush, has sought closer ties with Europe after recent disputes with its traditional Kremlin ally, which included a brief trade war this month over imports of Belarusian dairy products. EU countries account for about half of Belarusian foreign trade.

The EU offered Belarus financial aid if the country agrees to privatize its industrial assets, including its two largest refineries and potash deposits, and sells them to European investors, the Kommersant newspaper reported today, citing people it didn't name.

Only Canada and Russia have larger potash reserves than Belarus.

Source:

http://www.bloomberg.com/apps/news?pid=20601095&sid=aK3aeQFBe4HE

Google
 


Partners:
Face.by Social Network
Face.by