Belarus Rejects Sharp Devaluation


MOSCOW—Belarus's central bank ruled out a sharp devaluation of the country's currency, even as the International Monetary Fund and a top-level government official said such a move may be needed.

The announcement came amid a heightened level of worry in Minsk, where local residents stocked up on metro tokens and gasoline amid fears that the Belarussian ruble will lose its value.

"The National Bank fully rules out the possibility of a significant one-time adjustment in the exchange rate of the Belarussian ruble," the regulator said in a statement on its web site.

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 leading up to last year's presidential election left the country with a large trade deficit. Any devaluation or stringent fiscal tightening would be setbacks for the country's authoritarian president, Alexander Lukashenko, who was re-elected to a fifth term last year amid promises of wage growth and social spending.

Earlier this week, the central bank allowed local lenders to perform ruble operations at levels that deviated by as much as 10% from official exchange rates, effectively devaluing the currency. That announcement came just a day after the regulator promised to do all it could to avoid a devaluation.

But allowing a more flexible interbank exchange rate may not be enough, and Belarus may have to effect a true devaluation of its currency, said Chris Jarvis, the head of the IMF mission to Belarus.

"The national bank is not offering to sell forex at a depreciated rate, only allowing banks to do so. What little info we do have suggests that there is very little trading currently going on at these rates," Mr. Jarvis said. "We continue to think a devaluation will be helpful."

Belarussian Deputy Prime Minister Sergei Rumas also called for further devaluation of the currency, saying that markets were indicating that a 10% deviation wasn't enough, Belarussian news agencies reported.

"It is hardly reassuring to see the government and central bank at odds over such a key issue as exchange rate policy," said Tim Ash, an analyst at RBS.

The central bank also announced a freeze on introducing new currency regulation as it tightened monetary policy and waited for "talks with major foreign investors" to bear fruit. Belarus is counting on a $3 billion loan from Russia and a Moscow-led fund that helps ex-Soviet states to stave off economic woes.

Talks on that loan are still continuing, although Mr. Jarvis said it wouldn't be enough to solve the country's problems. "The solution should be a combination of financing and policy," he said.

In Minsk, panicked residents rushed to stock up on metro tokens only to find they could buy no more than two or three at a time. On Wednesday, long lines formed in front of gas stations as drivers made a run on gasoline ahead of a 10% rise in the price of gas.

—Olga Tomashevskaya in Minsk contributed to this article.


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