BELARUS NEWS AND ANALYSIS

DATE:

23/10/2008

Lukashenko Looks West for Money

In spite of Russia's promise of a $2-billion credit, the Belarusian National Bank has asked the International Monetary Fund for a loan in the same amount. Belarus severed most of its contacts with the IMF in 2004, but doubt that the Russian loan will be forthcoming and increasing local economic pressure has led Belarusian President Alexander Lukashenko to reconsider his position. A spokesman for the National Bank said the money would be used to supplement the country's gold and currency reserves. The loan application was made last week. Belarus will also begin new trade negotiations with the European Union.

Russian Deputy Prime Minister and Finance Minister Alexey Kudrin announced on October 21 that Belarus will receive a $2-billion loan from Russia, with one tranche of $1 billion this year and a second tranche next year. But no money has been allocate rot the loan yet. Thus, the application to the IMF may be a negotiating ploy with Russia. Lukashenko sharply curtailed his country's contacts with IMF after applying for a loan in 2004. Relations between them were normalized in 2007, but this is the first loan application Belarus has filed since then. A Belarusian National Bank spokesman stated to Kommersant that the two loans being negotiated are not related.

The National Bank has good reason to be worried. The Belarusian Ministry of Statistics reports that its reserves shrank by $658.9 million, or 11.8 percent, in September. The National Bank estimates its reserves at $4.94 billion. The IMF, using different methods, has calculated $4.12 billion. With that rate of outflow, the reserves will soon be too low to protect the Belarusian ruble from devaluation and the National Bank's expenses are still growing. Lukashenko signed a decree last Friday on guaranteeing the public's deposits in Belarusian banks. There is $6 billion in deposits to cover.

Source:

http://www.kommersant.com/p1045922/r_528/Belrus_foreign_debt_/

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