June 17, 2011 / 4:51 PM / 6 years ago

WRAPUP 1-Belarus leader rejects reforms to end crisis

* Lukashenko offers no new solutions to crisis

* Warns again that protests will not be tolerated

* Says West may block Minsk’s IMF aid request

By Andrei Makhovsky

MINSK, June 17 (Reuters) - Belarussian President Alexander Lukashenko promised on Friday to resolve a deepening financial crisis within several months but announced no concrete steps and said the country needed to be ready for a “catastrophe”.

In a marathon five-hour news conference, the authoritarian leader shifted tack repeatedly, varying defiance in the face of criticism from the West with offers of diplomatic concessions in exchange for much-needed loans.

Belarus has been struggling for months to pull out of a currency crisis -- largely fuelled by Lukashenko’s populist economic policies -- which has led to a 36 percent devaluation against the dollar.

Imported goods such as medicines are scarce. The government has frozen the price of some foodstuffs, but ordinary Belarussians continue to hoard staples such as sugar and cooking oil. Consumer prices rose by a third year-on-year in May and inflation is set to accelerate even further.

“We will overcome this situation in a few months, even without the loans we have secured,” Lukashenko said. “Believe me, we will.”

But he rejected calls for market reforms and warned that Belarus, which has used up a quarter of its foreign currency reserves this year, could be forced to reduce imports to a bare minumum.

“If there is a complete catastrophe we will close the borders and will only import what we need,” Lukashenko said.

Blaming journalists and the Internet for stoking panic, he warned that he would not tolerate further street protests.

Protest calls on social networking sites have multiplied as the crisis has worsened and the past two weeks have seen several public rallies, rare for the tightly-policed ex-Soviet republic.

But Lukashenko warned: “We will regard any future moves (protests) as attacks not only against the authorities but also against the people.” He added he would sack his interior minister if further rallies took place.

Belarus secured a $3 billion support programme from a Russian-led regional bailout fund this month. But the government says it needs more funds and is seeking loans of up to $8 billion from the International Monetary Fund.

Delivery of IMF aid, though, is complicated by Lukashenko’s poor image in the West since a police crackdown on an opposition rally against his re-election last December.

The United States and the European Union have instituted a travel ban on him and his inner circle while a Organisation for Security and Cooperation in Europe special report has accused his government of using harassment, torture and blackmail to keep the lid on unrest.

LOOKING FOR MONEY

Lukashenko said the rouble was undervalued at the current exchange rate of about 5,000 per dollar but offered no guidance and said foreign currency would not become freely available in retail exchange points at least until July.

The IMF has urged Minsk to abandon its multi-tiered system of varying foreign exchange rates and allow the rouble to float freely. It has also recommended that public sector wages be frozen and interest rates raised. [ID:nLDE75C10N]

Lukashenko said Belarus could soon boost its reserves by $10 billion without any borrowing. He did not say where the money would come from, but his words seemed likely to stir speculation that Belarus was about to sell off some state assets to Russia, its big trading partner.

The Minsk government is in talks with Russia’s Gazprom (GAZP.MM) over the $2.5 billion sale of its 50 percent stake in Belarus’ gas pipeline network. It has also said it could sell a 25 percent stake in its main cash cow, potash miner Belaruskali, whose value the government puts at $7.5 billion.

Diplomats said the EU would next week target Belarussian businesses with asset freezes to force Lukashenko to end a crackdown on the opposition in which several political figures who ran against him last December were jailed. [ID:nLDE75G0VQ]

Lukashenko sneeringly said on Friday that he might free those jailed so that they would no longer ”defile’ the country’s prisons, but he would not be forced into it by the West. (Writing by Olzhas Auyezov and Richard Balmforth; editing by Mark Trevelyan)

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