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Home News Russia delays Belarus rescue loan until June

Russia delays Belarus rescue loan until June

Published on 19/05/2011

Russia said Thursday its cash-strapped neighbour Belarus will have to wait at least until next month before it receives a bailout loan to help fill its cash-starved state coffers.

Russian President Vladimir Putin met the ex-Soviet republic’s strongman leader Alexander Lukashenko and huddled with other prime ministers from ex-Soviet states who are organising the Belarus rescue package.

Belarus said it hopes to receive a $3.0-3.5 billion dollar loan from a Moscow-led economic union of ex-Soviet states that would be disbursed in equal installments over three years.

Moscow has refused to provide any direct funding for Minsk and Lukashenko spent the day Thursday meeting with the other four prime ministers who make up the six-nation Eurasian Economic Community.

“These funds will not be provided as direct aid, but as loans at below market rates,” Belarus Prime Minister Miakhil Myasnikovich told reporters.

Russia’s Finance Minister Alexei Kudrin said the group will formally review the Belarus loan application in Kiev on June 4.

But Russian officials stressed they would be pressing Belarus to quickly follow through on the sale of state assets under a programme that could see Moscow win control of the republic’s key firms.

Belarus has been hit hard by an economic crisis that was sparked last year by a big jump in the price the country has to pay for Russian energy imports.

Its finances were hurt further by a wave of cheap loans and social benefits issued on the eve of Lukashenko’s disputed re-election last year.

December’s presidential election was followed by mass opposition protests and arrests. Belarus now faces sanctions from Europe and the United States and has no current programme with the International Monetary Fund.

The prime minister of Belarus underscored the situation’s urgency this week by admitting he may have to approach the IMF for a loan when the group sends a rare mission to Minsk next month.

The crisis also coincides with an April suicide bombing that killed 14 people and resulted in an even tougher government crackdown on the opposition.

Minsk took a series of incremental steps to devalue its currency in the past month before allowing the Belarus ruble to depreciate by 30 percent last week.

But economists predict further currency easing — an economic remedy that hurts people’s savings and devalues their salaries.

Austria’s Raiffeisen bank estimates the republic’s financial gap for the year at $5 billion to $10 billion.