Belarus will begin talks shortly with the International Monetary Fund on financing under a loan program, the IMF said on Wednesday as the financial crisis spreads to emerging markets.
“We confirm that we have approached the International Monetary Fund to provide credit to support financial stability, create a cushion of security and to maintain growth rates in the economy,” Belarus central bank spokesman Mikhail Zhuravovich told Reuters. “The amount of the credit depends on the IMF,” he said. News reports said $2 billion in lending was being sought.
Later in a statement in Washington, IMF Managing Director Dominique Strauss-Kahn said an IMF staff mission will begin discussions with the authorities within the next few days but the amount of funding still had to be determined. “The global financial crisis has adversely affected the Belarus economy and its access to external finance,” Strauss-Kahn said. “At the same time, changing conditions in trade have negatively affected the country’s balance of payments,” he added.
The ex-Soviet state is the latest in a string of countries to seek IMF help as emerging markets are hammered by growing fears that the world economy is headed for a deep recession. In recent weeks Hungary, Iceland, Ukraine and Serbia have turned to the IMF to help stabilize their economies.
The central bank confirmed the request a day after Russia’s finance minister said Moscow would issue a $2 billion loan to Belarus while resuming negotiations on a proposed common currency between the two ex-Soviet neighbors. The bank’s chief spokesman, Anatoly Drozdov, described the request as a “precautionary measure.” “As the economies of our neighbors and trading partners are affected by the crisis to some extent, we are taking precautions to ensure their problems don’t become ours,” Drozdov said. “Belarus has not suffered directly from the crisis.”
The IMF extended credits of $270 million to Belarus in the 1990s, but halted lending when the government failed to implement the Fund’s recommendations on reforms. Belarus’ economy is still largely state controlled and plans for selective privatization have made little progress. The government has raised its inflation forecast for this year to 14% after Russia hiked gas prices, but growth rates remain high with a 2008 target of 8.5-9.5%.
Dmitry Gourov, an analyst with UniCredit Bank in Vienna, said the request was logical to cover short-term debt, which amounts to about 60% of total debt of $14 billion. Minsk suspended its privatization program a week ago, saying there was little point selling state assets at discount prices. It has been unable to issue a debut Eurobond this year as planned. “They are trying to prepare themselves for the worst case scenario. If they were to cover all this short term debt on government and corporate side, they would need additional reserves,” Gourov said. “Everyone is still predicting robust growth for next year, only a slight mark down from this year.”
Foreign reserves fell in September to $4.9 billion, covering about 40% of external debt, from $5.6 billion. Russian Finance Ministry Alexei Kudrin on Tuesday said the decision to grant the $2 billion loan was taken last week -- with half to be issued this year and the other half next year. The terms of the loan were still under discussion. (Reuters)