Crisis-hit Belarus seeks Russia rescue

18th April 2011, Comments 0 comments

Russia on Monday held out the prospect of a rescue loan for crisis-hit Belarus after President Alexander Lukashenko vowed to adopt "unpopular" measures aimed at staving off economic collapse.

The veteran strongman is facing unprecedented domestic pressure after a March currency devaluation was followed by a deadly metro bombing last week that killed 13 people and shattered Lukashenko's vision of a stable Belarus.

The former Soviet republic already faces a dire hard currency shortage and last week was forced to introduce a $200 limit on all street currency exchange operations.

But queues of anxious Belarussians continue to snake around empty cash points while the unofficial exchange rate used by some private traders exceeds the one set by the state by 20 percent.

Economists now warn that Belarus will struggle to come up with $800 million in 2011 debt service payments while at the same time holding on to its currency and suggest that any rescue will depend almost entirely on Moscow's goodwill.

Russian Finance Minister Alexei Kudrin -- a liberal who opposes unconditional loans to Lukashenko -- suggested that the first Russian aid could come within a month if Belarus finally tightened its fiscal belt.

"I would like us to finish negotiations within a month," the RIA Novosti news agency quoted the Russian finance chief as saying while on a visit to Washington.

"But there may be certain difficulties with particular points," he added. "We are working on these issues every day."

Most economist point to two sources for the Belarus crisis -- a jump in the price Russia charges for energy and a costly social welfare and low-interest lending spree Lukashenko launched when facing re-election in December.

The man labeled by Washington as the last dictator of Europe then secured a contested victory that was followed by angry street protests and mass arrests.

The poll also resulted in a new wave of Western sanctions that removed the last prospect of lending from European powers such as Germany and Poland -- two nations that hinted at credits had Lukashenko overseen a credible vote.

Lukashenko has responded to the mounting problems by blaming both the cash crisis and the Minsk subway attack on the same unnamed enemy of the state.

"We saw this coming even before the presidential elections -- that they will try to put deliberate and methodical pressure on us, destabilising the situation," Lukashenko told a government meeting last week.

"And that is what has happened -- first the money market, then food, and then the metro blast, this is an entire chain," the Belarus president said.

Yet Lukashenko also lashed his cabinet and members of the National Bank for failing to adopt additional economic measures aimed at easing the country's currency pressures.

"Can you really not agree on a set of specific measures -- even if they do prove to be unpopular?" he demanded.

Belarus last month was forced to effectively devalue its currency by 10 percent and economists predict another devaluation of about the same size in the weeks to come.

A source in the National Bank told the Interfax news agency that Belarus was now ready to legalise the unofficial currency exchange rate used by street vendors.

The government was also reportedly eyeing price caps on food staples as well some basic services.

But some economists called these measures a half-hearted attempt to fight inflation that will do little to secure the $3 billion in assistance sought by Minsk from Moscow.

Two Moscow newspapers reported Monday that Belarus was now also willing to part with its stake in the Beltransgaz natural gas pipeline operator -- already half-owned by Russia's monopoly Gazprom -- in exchange for help.

© 2011 AFP

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