* President slashes price rise announced on Tuesday
* Currency crisis dents Lukashenko's credibility
* Fixing the economy will require unpopular reforms
By Andrei Makhovsky
MINSK, June 8 Belarussian President Alexander
Lukashenko, responding to rare public protests, on Wednesday
slashed a big rise in fuel prices announced only the previous
Mounting discontent over soaring consumer prices against the
backdrop of a currency crisis is putting political pressure on
authoritarian Lukashenko who has run the country since 1994,
maintaining a Soviet-style government-dominated economy.
The government this week raised the cost of a litre of
gasoline at the pump by roughly 30 percent to about $1 from
$0.72, saying the move was necessary to protect the domestic
market after a 36 percent devaluation of the rouble BYR= last
However, on Tuesday evening, hundreds of motorists staged a
protest rally along Minsk's main thoroughfare, hooting their car
horns and raising the lid of their trunks to demonstrate dismay
at the gasoline price rises.
"Let us agree that from tomorrow morning, gasoline will cost
... no more than 4,500 roubles ($0.81)," Lukashenko told a
government meeting on Wednesday.
Before the price hike, the price per litre stood at about
Lukashenko's opponents said Wednesday's move created a
dangerous precedent for the government.
"People may ask themselves 'If it worked with gasoline, why
don't we try the same with sugar and other foodstuffs and
products'," said Anatoly Lebedko, the leader of opposition
United Civic Party.
The ex-Soviet republic of 9.5 million people has been
fighting a deepening currency crisis for months.
It lost more than a quarter of its foreign currency reserves
before devaluing the rouble in May. On June 1, reserves stood at
$3.6 billion, down from $5.0 billion on Jan 1.
Consumer prices have risen by over 20 percent in January-May
and officials say full-year inflation could reach 39 percent.
The crisis has prompted panic buying of food staples such as
sugar as well as durable goods.
Shortly after the rouble devaluation the government froze
prices of key foodstuffs, but analysts say the measure may lead
to shortages and prompt rationing, further denting confidence in
Minsk has requested help from its traditional ally Russia
and, later, from the International Monetary Fund.
A Russian-led regional fund this month agreed to provide the
government with a $3 billion loan over three years on conditions
of cutting the budget deficit and carrying out a $7.5 billion
Admitting that this will not be enough, Minsk has asked the
IMF to provide a loan of up to $8 billion. But Belarus's
relations with the West have soured after Lukashenko's crackdown
on a protest against his re-election last December.
In addition, analysts say the much-needed rebalancing of the
economy would require some painful steps since the crisis was
largely caused by generous public spending, including wage
increases, in the run-up to the December 2010 election.
"...To truly reverse structural deterioration, policies will
have to focus on improving productivity and international
competitiveness," rating agency Moody's said in its report on
Belarus this week.
These must include introducing limits on real income growth
and cutting "subsidies and amenities to which Belarusians have
become accustomed", according to Moody's, which maintained a
negative outlook on Belarus' B2 long-term rating.
"Such retrenchment would undoubtedly be unpopular and could
jeopardise the seeming stability that has characterised
Belarus's authoritarian political environment for almost two
decades," Moody's said.
(Writing by Olzhas Auyezov; editing by Stephen Nisbet)