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Belarus settles on a single currency rate

20 october 2011, 13:57
Crisis-hit Belarus was due Thursday to relax more of its strict currency trade regulations in a bid to meet conditions for an IMF rescue loan that could pull it through the winter months, AFP reports.

The full market free float follows a weeks-long span in which the local ruble was bought and sold freely at short special sessions while most firms were forced to sell their hard currency at a less advantageous official rate.

The new unified session will set a single exchange rate and is likely to see the ruble's official value drop against the dollar and euro.

"The free float ... is necessary. It will restore the balance between supply and demand for foreign currency ... and will over time lead to the current account rebalancing," said Nomura bank emerging market analyst Tatiana Orlova.

"In the medium term, it should help economic growth as it should restore competitiveness of exporting sectors and reduce demand for imported goods."

Orlova also warned however that Belarus must now focus on stemming an inflation rate that continued to spiral this summer and touched 80 percent in year-on-year terms last month.

She said the IMF is still unhappy with Belarus for recently raising state sector wages in a bid to deal with the political risks of the skyrocketing prices.

"I think that after the devaluation, the government will need to demonstrate its commitment to fiscal discipline and tight monetary policies in order to receive the IMF assistance," Orlova said.

Belarus President Alexander Lukashenko predicted earlier this week that the ruble rate would soon stabilise and start climbing again.

"As soon as all this currency pours out onto the market -- the dollars and the euros that we now spend on buying gas (from Russia) and so on -- then the supply of dollars will be very high," Lukashenko said.

A dire fiscal crisis linked to pricing disputes with Russia has forced the ex-Soviet republic of about 10 million people to devalue its currency by some 60 percent since May.

The authoritarian president had bitterly resisted the unpopular measure and himself raised the possibility of getting as much as $7.5 billion from the IMF this summer.

An IMF team concluded a fact-finding mission to Minsk this weekend by urging Minsk to tighten its fiscal policies.

Belarus is also hoping to receive $3.5 billion in the next three years from a group of nations led by Russia in exchange for a full-fledged privatisation drive.

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