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Foreign Exchange

Capitalist woes strike down Belarussian rouble

Despite remaining a largely centrally planned economy, Belarus has not been immune to the fallout from the global credit crunch and the associated macroeconomic slowdown. At the beginning of the year the country was forced to devalue the Belarussian rouble by 20% to BR2,650 to the dollar and raise its key refinancing rate to 14% from 12%.

The move came in the wake of growing pressure on the currency as a result of falling exports and growing demand for dollars among the population that forced the authorities in Minsk to use up to $1.33 billion of precious gold and foreign-currency reserves in 2008 to maintain the currency above BR2,000 to the dollar.

The devaluation of the Belarussian rouble and the higher interest rates come in the wake of an agreement with the IMF for a $2.5 billion standby arrangement. Under the terms of the emergency loan package, the Belarussian government had to sanction a strengthened monetary and exchange rate policy framework, cuts in public investment and directed lending by banks, and public sector wage restraint. As part of the deal the administration led by authoritarian president Alexander Lukashenko also agreed to devalue its managed currency, cut budget spending and recapitalize its banks.

"We live in new conditions
and see new requirements.
We must give businesses
more freedom"

Alexander Lukashenko

Although the Belarussian economy is still mainly in state hands, in recent years there have been growing moves toward privatization and liberalization, which have helped to boost output.

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