IMF urges Belarus to tighten monetary, fiscal policy

By Andrei Makhovsky

MINSK, April 6 (Reuters) - The International Monetary Fund on Wednesday urged Belarus to tighten its monetary and fiscal policy as the former Soviet republic's foreign currency reserves fell to a two-year low.

Belarus' reserves calculated according to the IMF standards were down at $3.761 billion as of April 1 from $4.023 billion on March 1, the central bank said in a statement, as the population rushed to buy foreign currency.

Comparative figures showed that this was the lowest level in reserves since the global economic downturn of 2009 when Belarus had to turn to the IMF for a $3.6 billion bailout facility.

This time, however, Belarus has not asked the Fund for assistance, Chris Jarvis, the head of the IMF mission to Belarus told reporters in Minsk through a video link.

"I can tell you we have not received any requests," Jarvis said through an interpreter.

After losing a quarter of its reserves so far this year, the central bank halted foreign currency sales in mid-March as the government asked Russia and other ex-Soviet states for a $3 billion bailout package.

It has allowed the Belarussian rouble to devalue by 10 percent from the official rate on the over-the-counter market but analysts say further devaluation may be needed.

The bank restarted forex sales this month but has said it would only sell as much as it can buy and would not deplete reserves -- which now cover only about one month of imports -- any further.


Belarus' 2009 deal with the IMF has been described by both sides as successful.

But after the IMF programme expired -- and in the run-up to the December 2010 presidential election -- President Alexander Lukashenko's government embarked on a spending spree that included generous public sector wage increases.

Lukashenko won the vote to secure a fourth term in office but Western governments have criticised the poll and the subsequent crackdown on opposition protests. The United States and the EU have since introduced sanctions against Lukashenko.

Jarvis said the currency measures taken so far gave the Belarus authorities some time to come up with a comprehensive action plan but were not a solution by themselves.

"I believe that more needs to be done to reduce the current account deficit and restore trust in the economy and in the rouble," he said.

"We think it is necessary to reduce budget deficit and significantly cut lending under government programmes... (and) to tighten the monetary policy, in particular, by raising interest rates so they are positive in real terms."

Belarus' central bank raised its key interest by 200 basis points to 12 percent in February. Consumer prices rose by 13 percent year-on-year in the same month.

Jarvis said Belarus could add more flexibility to the exchange rate but declined to say what level of devaluation would be appropriate.

Analysts say Western governments could block Belarus' attempts to secure fresh IMF funding.

The Fund itself has said that "any future financial arrangement should be accompanied by a credible commitment to strong stability-oriented policies and an ambitious structural reform agenda". (Writing by Olzhas Auyezov; editing by Richard Balmforth/Ruth Pitchford)


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