IMF:Belarus Needs 'True' Devaluation To Save Shrinking Reserves

MOSCOW (Dow Jones)--Belarus may have to allow a "true" devaluation of its currency in order to save its shrinking foreign currency reserves, the International Monetary Fund said, as long lines of cars formed in front of Minsk gas stations after an announced rise in gasoline prices.

The National Bank of Belarus earlier this week allowed local banks to perform ruble operations at levels that deviated by as much as 10% from the official exchange rate in an effort to encourage foreign currency selling by exporters, shore up reserves and satisfy demand from local companies.

This however, may not be enough to solve the country's financial woes, Chris Jarvis, head of the IMF mission to Belarus, said in a telephone interview late Wednesday.

"I would not characterize this as a devaluation, as the national bank is not offering to sell forex at a depreciated rate, only allowing banks to do so," said Jarvis. "What little info we do have suggests there is very little trading going on at these rates, meaning we shouldn't regard this as some kind of settled rate."

Meanwhile, the Belarussian central bank expects a loan from Russia to be received in the next 20 or 30 days and meanwhile will keep current foreign-exchange policy unchanged, Interfax reported Thursday, citing an unidentified person close to the regulator. A spokesman for the Belarus central bank declined to confirm or deny the report when contacted by Dow Jones Newswires.

Belarus has lost 20% of its foreign currency reserves this year, after a sharp rise in the price of Russian oil imports and a boost in government spending left the country with a large trade deficit.

Investment banks including Unicredit SpA and Royal Bank of Scotland had been predicting a 20% devaluation of the currency.

Devaluation would still be helpful to Belarus, Jarvis said, adding that the size of such a move would depend on "the overall macroeconomic framework, and the extent of adjustment by other means, including monetary and fiscal tightening."

Some of that fiscal tightening was evident yesterday in Minsk, as cars lined up in front of gas stations ahead of a 10% rise in gasoline prices, which is to go into effect Thursday. Minsk is counting on a $3 billion loan from Russia and a Moscow-led banking consortium that helps out former Soviet states to provide a lifeline to its struggling economy. Talks on that loan are still ongoing, although Jarvis said it would not be enough to solve the country's problems.

"The solution should be a combination of financing and policy," Jarvis said.

He also said that a Belarus default was an unlikely scenario, as government officials have told the IMF they will give a priority to servicing debt and the country has made its debt payments for March.

-By Ira Iosebashvili, Dow Jones Newswires; +7 495 232-9192,


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