June 15, 2016 / 12:20 PM / 3 years ago

UPDATE 1-Belarus says has met IMF criteria and expects new loan

(Adds quotes, context on Belarussian economy)

By Andrei Makhovsky

MINSK, June 15 (Reuters) - Belarus has fulfilled the basic criteria to qualify for new loans from the International Monetary Fund (IMF) and expects it to start lending again after a six-year gap, a Belarussian Finance Ministry official told Reuters on Wednesday.

The former Soviet republic has asked for $3 billion from the Fund to help refinance $3.3 billion in foreign loans this year after a protracted recession in Russia, a major export market, brought about two years of economic downturn in Belarus.

The IMF, which is due to send a mission to Minsk on June 21, has said it is willing to lend to Belarus provided efforts are made to reform its economy, run along Soviet-style command lines since 1994 by President Alexander Lukashenko.

“All the preliminary conditions that were discussed by the government have been implemented,” finance ministry deputy Maxim Ermolovich said. “We expect an appropriate response from the IMF and the start of a new programme.”

Recent reforms include gradually raising long-subsidised household energy and utilities tariffs and the retirement age.

Other IMF conditions include budget cuts to compensate for lower revenue and less support for loss-making state-owned firms.

“Companies should and must reduce costs,” Ermolovich said.

Belarus’s economy contracted 4 percent in 2015 and has shrunk 3 percent since the start of this year.

Besides the potential IMF loan, Belarus also expects to borrow $1.1 billion from the Russia-controlled Eurasia fund by the end of this year. It also plans to raise $450 million on the domestic bond market this year.

The IMF’s last loan to Belarus totalled $3.5 billion and was disbursed in 2009-2010. It resumed talks on new financing in the wake of a recent thaw in relations between Minsk and the West.

Seeking more friends in Russia’s back yard, the European Union in February ended five years of sanctions against Belarus and Lukashenko, citing improving human rights. (Writing by Alessandra Prentice; Editing by Louise Ireland)

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