BELARUS NEWS AND ANALYSIS

DATE:

23/01/2009

Belarus forex reserves fall in Jan despite IMF loan

By Andrei Makhovsky MINSK, Jan 23 (Reuters) - Belarus's foreign exchange reserves fell $100 million since Jan. 1 despite receiving $788 million as part of an IMF loan, an official said on Friday, indicating the central bank had spent almost $900 million on propping up its currency. Belarus devalued its rouble by 20 percent on Jan. 1, partly to meet IMF conditions set on a $2.5 billion loan. It also cut salaries in the state sector, budget expenditure and raised rates for communal services and raised the refinancing rate. Officials say they sought the IMF loan to create a cushion against the impact of the global financial crisis. While Russia and Ukraine have been suffering since September, Belarus's largely state-controlled economy had fared well. There are now clear signs, however, that the crisis has hit Belarus -- officials expect zero percent economic growth in January against 8.3 percent growth a year ago. The rouble has been under pressure despite the IMF loan because its exports have slumped. Prices for potash, of which Belarus is one of the largest exporters in the world, have dropped from historic highs. The currency's rate was set at 2,695 per dollar for Friday, weaker than the original devaluation to 2,650/$ from 2,200/$. "Taking into account the credit that was received, reserves now have been reduced by $100 million in comparison to Jan. 1," Deputy Central Bank Chairman Pavel Kallaur told a news conference. Reserves at the start of the year amounted to $3.6 billion, far lower than $4.8 billion in October, the month the central bank started to spend significantly more on supporting the currency. Shocked by the New Year's Day devaluation, Belarussians rushed out to shops to buy household and other goods in anticipation of higher prices. And prices did go up -- 3.5 percent in January against 2.5 percent the same month last year. "The devaluation was 20 percent, but many increased prices by 60 percent, and in some places even by 100 percent," Deputy Prime Minister Andrei Kobyakov told the same news conference. "Now, we are making checks all over the country. We have had to even move away from a policy of price liberalisation to put people in line." Economy Minister Nikolai Zaichenko told reporters the economy would neither grow nor shrink in January. He said the government wants to see how the economy fares in the first quarter before considering changing a 11 percent economic growth forecast for 2009. The IMF sees growth this year at 1.4 percent, against 10 percent in 2008. Foreign investors' interest in Belarus has increased in the last 18 months after the ex-Soviet state received its maiden sovereign ratings. Long-serving President Alexander Lukashenko wants to improve both diplomatic and economic ties with the West. Some state assets have already been sold to foreign investors, a golden share rule has been scrapped and the tax system simplified. (Writing by Sabina Zawadzki; Editing Andy Bruce) K

Source:

http://www.cnbc.com/id/28814629

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