Cash-strapped Belarus seeks IMF rescue

Belarus said yesterday it had asked the International Monetary Fund for a rescue loan to bail it out of a growing economic crisis that has seen currency devaluation and consumer panic.

“The Belarus government and the National Bank of the Republic of Belarus on May 31, 2011 sent an application to the International Monetary Fund for the extension of a stabilisation loan,” the Belarus government said in a statement.

An IMF spokeswoman in Belarus confirmed the request but neither she nor the government disclosed the amount Belarus was seeking or the terms of the potential deal.

The approach to the IMF underlines the severity of the economic crisis in Belarus and appears to be a major U-turn by the authorities and President Alexander Lukashenko who until recently refused to turn to the fund for credit.

The ex-Soviet republic’s government said the loan negotiations officially kicked off in Minsk yesterday and would continue through June 14.

It added they would cover currency issues and “determine the possibility of the International Monetary Fund supporting the macroeconomic policies as pursued by the government and the National Bank.”

Belarus has been hit by a heavy current account deficit that was sparked by a jump in the price Russia charges for its energy and a massive state spending campaign that preceded presidential elections last year.

Any IMF package is likely to come with stringent conditions for austerity measures and reforms whose implementation Lukashenko has until now fiercely opposed.

Lukashenko’s regime was forced to devalue the currency by more than one-third of its value last month and has been unable to receive direct assistance from traditional ally Russia.

It is now seeking a rescue package estimated at $3 billion from a group of former Soviet republics that is smaller than Lukashenko had hoped for and will not be issued until he agrees to loosen his tight grip on the economy.

But Lukashenko has expressed unwillingness to cede control of the country’s most important enterprises at prices suggested by Russia. Lukashenko also told the nation in a rambling address last week that he did not intend to cut social spending and instead blamed enterprises for failing to deliver efficient results.

Belarus has no current programme with the fund after receiving its last IMF credit in March 2010 and Belarus only hinted it was ready to apply for new assistance when local businesses had effectively ground to a halt two weeks ago.

The IMF issued a scathing assessment of the government’s economic management after its last visit to Minsk in March and urged it to take some “difficult decisions”.

The National Bank this week hiked its main interest rate by an unprecedented 200 basis points to 16 per cent in a bid to attract confidence in the local ruble and stamp out inflation that was last predicted to reach 39 per cent this year.