BELARUS NEWS AND ANALYSIS

DATE:

31/10/2008

Belarus seeks loan 'cushion'

By Jan Cienski in Minsk

Belarus is promising to reform its economy and sell off some state assets as it holds talks with the International Monetary Fund on a possible $2bn (?1.2bn, ?1.5bn) loan as a "security cushion" in case of further turbulence from the global financial crisis.

Minsk has used about 10 per cent of its foreign currency reserves, which now stand at about $4.9bn, over the last month as it tried to support the Belarusian rouble.

Belarus, which has a relatively underdeveloped financial sector, was not affected by the initial shock of the crisis, but it has been hit by turmoil in Russia, its main trading partner, and neighbouring Ukraine.

"In the first phase Belarus was only minimally affected. But in the second phase, with terms of trade becoming worse, we anticipate certain problems will confront our exporters," Vasily Matyushevsky, the deputy chairman of the central bank, told reporters yesterday.

The IMF has already agreed to loan Hungary $25.1bn and Ukraine $16.5bn. An IMF delegation arrived in Minsk on Sunday and is holding talks with the Belarusian government.

"It is needed to safeguard against any shocks or stresses," said Andrei Kobyakov, the deputy prime minister, adding that if the economic situation improved Belarus might end up not needing the loan.

Belarus, one of Europe's last authoritarian states, has long been one of Russia's closest allies but in the last year has been cautiously opening itself to the west.

In September it increased the permitted foreign stake in local banks to rise from 25 to 50 per cent.

The government is planning to sell off four state owned banks and other state-owned enterprises.

"We are taking steps to improve the business climate of our country, to ensure a continued inflow of foreign direct investment," Mr Matyushevsky said.

Belarus is in the final stages of negotiating a $2bn loan from Russia, which supplies Belarus with most of its oil and gas.

Mr Kobyakov denied that the terms of the loan were tied to Belarusian recognition of Abkhazia and South Ossetia, two break-away regions of Georgia that Russia says are independent states.

"The Russian loan is not linked to the global economic crisis, although in today's situation it is coming just in time," he said.

The Belarusian economy grew by 8.2 per cent last year and the government said it expected growth this year to be at least 10 per cent.

Source:

http://www.ft.com/cms/s/0/d8c41444-a620-11dd-9d26-000077b07658.html

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