Belarus made a first step toward overcoming a deep currency crisis on Saturday, securing a US$3 billion loan from a Russian-led bailout fund, but said it still needed funding of up to US$8 billion from the IMF.
The Minsk government hopes that together these funds, equal to a fifth of its GDP, will help the former Soviet republic avoid economic chaos, stabilize its rouble currency and tame runaway inflation.
Belarus devalued the rouble by 36 percent last month and froze prices of key foodstuffs that had soared, prompting people to hoard staples such as sugar and queue in front of currency exchange points.
The crisis was a political blow to authoritarian Belarussian President Alexander Lukashenko, who has run the country since 1994, keeping the Soviet-style -government-dominated economy largely intact and touting welfare and stability as his key achievements.
On Saturday, Belarussian Finance Minister Andrei Kharkovets said he hoped the Russian loan would facilitate a deal with the IMF, whose mission will work in Belarus until June 13.
The first tranche of the loan, which could be disbursed this month, will amount to US$800 million. Further tranches will be disbursed within three years following reviews of key program indicators.
The deal requires Belarus to sell off US$7.5 billion in state assets within the next three years. Kharkovets said it did not require privatization of any specific companies, but analysts say potash miner Belaruskali is the most interesting asset.
“We base our assumption [of a successful bid for IMF aid] on the fact that the program signed today will satisfy also the International Monetary Fund,” Kharkovets said.
However, analysts say the IMF, which issued US$3.5 billion in loans to Minsk from 2009 to last year only to see all progress erased by increased public spending in the run-up to last year’s presidential election, will put up tougher requirements.
Lukashenko’s latest crackdown on the opposition also complicates the situation. Police rounded up hundreds of people, including several presidential candidates, who protested against Lukashenko’s re-election last December.
Western monitors criticized the vote as fraudulent and the US and the EU have since introduced travel bans against Lukashenko and his senior officials as well as other sanctions.
“Belarus is unlikely to get [IMF] financing without approval of an aggressive plan of structural reforms,” BNP Paribas economist Julia Tsepliaeva said in a note on Friday.
“In addition, political aspects are reducing chances of the country to win IMF support,” she said.
“The first tranche of the [Russian] loan [US$800 million], which may come in the middle of this month at the earliest, is clearly insufficient for the country’s needs — and demand for financing will remain high.”
Lukashenko has threatened to sack the government and central bank heads if they fail to restore order on the foreign currency and consumer markets by the end of this month.
The government last week announced plans to cut the budget deficit by a half to 1.5 percent of GDP and said it would cancel all exemptions that allowed some exporters to dodge mandatory foreign currency sales.
In other developments, Egyptian Finance Minister Samir Radwan said yesterday Egypt was about to conclude a US$3 billion standby financing arrangement with the IMF, but was still working out some of the terms.