Belarus Devalues Currency Less Than Expected, Bonds Rally

By Scott Rose

Belarus devalued its currency less than analysts expected, lifting its sovereign debt and stoking the biggest rally in the country’s notes in Russian rubles since they were sold in December.

Local lenders may sell foreign currency to companies at an exchange rate that deviates as much as 10 percent from the official rate, widening the spread from 2 percent, according to a statement published on the central bank’s website today. Banks including UniCredit SpA and Royal Bank of Scotland Group Plc expected the ruble to be devalued by at least 20 percent.

The former Soviet republic, wedged between European Union member Poland and Russia, is struggling to keep its public finances afloat as reserves dwindle and ratings services downgrade the country’s debt. The government is seeking a loan of $3 billion from Russia and other former Soviet partners.

The move aims to enable banks to “meet demand of Belarusian companies for foreign currency, increase the exporters’ interest in selling their foreign-currency income and also create the conditions necessary to help grow the government’s gold and foreign-currency reserves,” the Natsionalnyi Bank Respubliki Belarus said in the statement.

The central bank devalued the ruble by about a fifth in January 2009 and pegged it to a currency basket after the global financial slowdown eroded demand for Belarusian exports like potash and refined oil products.

Bonds Gain

Belarus’s sovereign bonds denominated in Russian rubles due in December 2012 rose, sending the yield 106 basis points lower to 10.690 percent. The country has more than $2 billion of ruble and dollar debt outstanding, according to data compiled by Bloomberg.

Belarus’s ruble was unchanged at 3,039 per dollar today after its biggest two-day decline in five months last week.

The yield on Belarus’s dollar bonds due in 2015 fell 28 basis points to 11.873 percent by 3 p.m. in Minsk. The notes tumbled last week, pushing the yield to 12.374 percent on March 23, the most since they were sold in August. The country’s 2018 dollar bonds rose, sending the yield 19 basis points lower to 11.603 percent.

‘Small’ Devaluation

Widening the ruble’s trading range is “equivalent with a small, 8 percent devaluation,” Barbara Nestor, an emerging- market analyst at Commerzbank AG in London, wrote in an e-mailed note today. The measure will lead to a 10 percent drop in the currency, Timothy Ash, head of emerging-market research at RBS in London, said by e-mail.

“A 10 percent devaluation, in effect, on its own is not really a game changer, as the sheer size of the current account deficit implies a fundamental and structural lack of competitiveness of the economy,” Ash wrote. “Longer term currency trends will be dependent on how rigorous government efforts are at reform.”

The International Monetary Fund urged policy makers in Belarus on March 9 to curb spending and boost interest rates to narrow a current account deficit that reached 16 percent of gross domestic product.

The central bank’s press service wasn’t immediately available to comment when contacted by telephone.

To contact the reporter on this story: Scott Rose in Moscow at

To contact the editor responsible for this story: Willy Morris at


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