UPDATE 3-Belarus says no devaluation or new FX limits for now

Thu Mar 31, 2011 12:24pm EDT

Related Topics

* Cbank rules out sharp devaluation

* Deputy PM suggests earlier 10 pct devaluation not enough

* Rouble could weaken further - analysts

(Adds cbank statement, Belarus Deputy PM, Russia FinMin comments)

By Andrei Makhovsky

MINSK, March 31 (Reuters) - Belarus' central bank on Thursday ruled out a sharp further rouble devaluation or any additional foreign exchange restrictions as the authorities expected to secure Russian financial aid soon.

However, Deputy Prime Minister Sergei Rumas suggested a de facto 10 percent devaluation in the rouble BYR=, announced this week, was not enough, indicating there were disagreements among senior officials on how to deal with an acute shortage of foreign currency.

Analysts also say the 10 percent devaluation will not be enough to support the economy of the former Soviet republic but could help it secure foreign cash.

Talks with Russia on $3 billion in aid may take longer than Minsk expects, however, as Moscow wants to see a comprehensive economic stabilisation plan before considering a bailout loan.

"This is not a decision to be made in a day or two," Russian Deputy Finance Minister Dmitry Pankin told Reuters.

"Everything is possible but, so far, we have not even seen any macroeconomic policy statements from them."

Belarus' Finance Ministry sought to reassure investors, including the holders of Belarus' two Eurobonds BY052939470= BY058361623=, saying servicing foreign debt was a priority.

The currency has come under pressure because of a big trade deficit, generous wage increases and loans handed out by the government in the run-up to last December's presidential election, when President Alexander Lukashenko won a fourth term.

The central bank's forex reserves fell 20 percent in the first two months of this year to $4 billion due to the trade deficit.

Analysts say further devaluation may be needed -- ING estimates the Belarussian rouble's fair value at 3,500-4,000 per dollar compared to the current official rate of 3,045 BYR=. There had been market talk of another move on Friday.

The central bank, however, said it would stand firm.

"The central bank completely rules out carrying out a significant one-off adjustment of the Belarussian rouble's exchange rate," it said in a statement.

However, just hours later, Deputy Prime Minister Rumas was quoted by state news agency BelTA as saying the central bank had not gone far enough with its decision this week to effectively let the rouble depreciate by 10 percent.

"Several authoritative experts are saying that this is a half-hearted measure and the central bank must take further steps in this direction," he was quoted as saying.

"Signals from the market indicate that this 10 percent (of allowed) deviation is not enough."

Separately, a central bank source told Reuters the bank and the government were hoping to secure external financial aid within the next 20-30 days.

"By that time we expect to get a loan (from Russia)," the source said.

Moscow has said it wanted to see a credible anti-crisis plan before extending loans to Belarus and analysts say the limited devaluation may have been part of it.

QUEUES FOR FUEL, RAIL TICKETS

The central bank, whose forex reserves fell 20 percent in the first two months of this year to $4 billion due to the trade deficit, later confirmed it had no intention of introducing any additional foreign exchange controls. But it made no official pledges on exchange rate stability.

Belarus citizens remained unconvinced, preferring to spend money on goods rather than keep the rouble.

Unusually long queues formed at gas stations this week ahead of a 10 percent fuel price increase announced earlier.

Minsk residents were also queuing up to buy underground rail tickets ahead of a 20 percent price hike, prompting the operator to limit sales to two tickets per person.

Importers of consumer electronics and other durable goods say demand has risen as Belarussians expect prices to increase and foresee shortages.

"The situation could be described as a crisis," said a businessman who imports computers, speaking on condition of anonymity. "Large importers are afraid to import goods because they expect a devaluation and are unsure about pricing." (Additional reporting by Toni Vorobyova in Moscow; Writing by Richard Balmforth and Olzhas Auyezov; Editing by Susan Fenton)

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