June 30, 2011 / 11:32 AM / 6 years ago

UPDATE 1-Belarus pledges to unify exchange rates, sell assets

* Devaluation has failed to bring liquidity to fx market

* Govt hopes to plug current account gap with asset sales

* Plans IPO for key asset, potash miner Belaruskali

* Runaway inflation breeds public discontent

(Adds details, privatisation plans, background)

By Andrei Makhovsky

MINSK, June 30 (Reuters) - Crisis-hit Belarus vowed on Thursday to eliminate the black currency market by the end of this year after patching up its current account with loans and privatisation receipts .

Among the assets that the former Soviet republic plans to sell is its main cash cow, potash miner Belaruskali, as well as truck maker BelAZ, First Deputy Prime Minister Vladimir Semashko said.

Belarus devalued its rouble by 36 percent last month after losing a quarter of its foreign currency reserves due to a large current account deficit triggered by populist economic policies.

However, on the black market the rouble still trades up to 15 percent below the official exchange rate.

“President (Alexander Lukashenko) has ordered the central bank and the government to unify the (official and market) rates by the end of this year at 5,000 roubles per dollar or slightly more than that,” Semashko told parliament.

The official rate was 4,964 roubles per dollar on Thursday.

SELLING ASSETS

In order to plug its current account deficit, Belarus is ready to sell a stake in the crown jewel of its industry, potash miner Belaruskali, which, together with its Russian partner Uralkali , controls 30 percent of global potash fertiliser market.

“I have proposed to prepare a placement of a minority stake (in Belaruskali) on one of the international stock exchanges,” Semashko said. “The global (best) practice is to sell 10-15 percent. This is how we will operate.”

He did not say when the placement would take place or how much it could fetch. Lukashenko has previously valued Belaruskali at $30 billion.

Officials and industry sources have said Belaruskali could be sold to Uralkali or its owner, Russian magnate Suleiman Kerimov, but a deal has failed to materialise.

Semashko said, however, that Belaruskali would get a $1 billion cash advance from Uralkali this year, secured either by future product supplies or the Belarussian firm’s assets.

Belarus will also make an initial public offering of shares in BelAZ, a producer of heavy machinery such as industrial haulage trucks used in mining, Semashko said. Deutsche Bank is working on the IPO, he said.

LUKASHENKO UNDER PRESSURE

Belarus has so far avoided large-scale privatisations, sticking to a Soviet-style economic model with centralised planning, state ownership of key assets and a heavily subsidised welfare system.

But rising prices of energy supplies from Russia have put pressure on the economy. Belarus imports both oil and gas from Russia and the oil refining sector is a major contributor to its industrial output.

Finally, Lukashenko’s decision to raise wages by 40 percent, along with other populist steps, in the run-up to the December 2010 election knocked the economy completely out of balance.

Lukashenko secured a fourth term in office in the poll but faced strong Western criticism over alleged vote-rigging and a subsequent crackdown on an opposition protest rally. Economic woes followed shortly.

Imports have soared this year, driven by demand both from consumers and businesses, while exports failed to catch up, creating a growing gap in the current account and eventually forcing Belarus to devalue.

Consumer prices rose by a third year-on-year in May and full-year inflation could reach 39 percent, the highest projected rate in the world this year.

Faced with dwindling incomes and savings, ordinary Belarussians have launched regular public protests against price hikes, despite the threat of detention and fines.

Minsk has secured a $3 billion loan from a Russian-led regional bailout fund but says it needs more money and has asked the International Monetary Fund for a loan of up to $8 billion. (Writing by Olzhas Auyezov; Editing by Susan Fenton)

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