BELARUS NEWS AND ANALYSIS
DATE:
15/03/2011
Belarus Downgraded by S&P
By IRA IOSEBASHVILI
MOSCOW—Standard & Poor's Ratings Services cut its long-term foreign-currency rating for Belarus to single-B from single-B-plus, warning that the country was rapidly running out of foreign currency, while residents lined up at exchange offices in the capital seeking to convert their rubles.
The National Bank issued a statement denying that it plans to devalue the currency and calling rumors to the contrary politically motivated "provocations."
The downgrade within the highly speculative range, announced Tuesday, came just days after the International Monetary Fund warned Belarus that its current-account deficit had become unsustainable and urged the government to rein in policies of wage increases, credit expansion and external borrowing.
Belarus successfully completed an IMF financial program a year ago, but then boosted spending sharply ahead of December presidential elections. Western capitals denounced widespread violations in that vote, which brought authoritarian President Alexander Lukashenko another five-year term.
S&P also cut its long-term local-currency rating to single-B-plus from double-B.
"The rating actions reflect the country's heightened vulnerability to negative external financing trends because of the deterioration in usable reserves," S&P credit analyst Ana Mates said in a statement.
Belarus' foreign-exchange reserves dropped to $4.02 billion as of March 1, from $4.34 billion Feb. 1, down by 20% since the end of 2010. Rising prices for oil and gas from Russia threaten to worsen Minsk's economic troubles, analysts said.
In a bid to ease pressure on the country's foreign reserves, Belarusian authorities have raised trading fees on foreign currencies and restricted companies from buying foreign currency in excess of ˆ50,000 ($69,995) to finance imports of equipment.
Analysts said that if financial pressures continue, Minsk could be forced to sell assets, such as a stake in potash miner Belaruskali, or turn to Moscow for loans.
Russian Prime Minister Vladimir Putin arrived in Minsk for a previously scheduled visit Tuesday. Officials said a Moscow-led regional bloc is considering a bailout loan of as much as $2 billion for Minsk.
Belarus tracks its ruble against a basket of three currencies—the U.S. dollar, the euro and the Russian ruble. In its statement, the central bank repeated its previously announced intention of not allowing the Belarusian ruble to rise or fall more than 8% in relation to the basket.
The Belarusian ruble traded at 1,102.17 against the basket Tuesday, up 0.08% from the day before. Against the dollar, the Belarusian ruble traded at 3018.12, weakening from 2985.51 Belarusian rubles the previous day.
In Minsk, lines formed in front of currency exchange booths, many of which said they were out of dollars and euros.
At one exchange booth, a cashier said that the shortage of foreign currency was due to "a stupid rumor that someone is spreading."
A central bank spokesman said that foreign currency was in short supply due to technical problems that would be fixed by Wednesday. Reports of an imminent devaluation were a "targeted provocation by certain political circles, using their Internet resources to spread rumors of a devaluation of the national currency."
—Olga Tomashevskaya in Minsk contributed to this article.
Source:
http://online.wsj.com/article/SB10001424052748704662604576202663692592464.html
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