Belarus urges IMF to clear way for credit program

MINSK (Reuters) - Belarussian President Alexander Lukashenko accused the International Monetary Fund of playing politics and said the Fund should clear the way for a new $3.5 billion credit program.

The former Soviet republic, which is recovering from a balance-of-payments crisis and a subsequent devaluation of the Belarussian rouble, faces a foreign debt repayment crunch in 2013. Officials plan to sound out Asian investors this week on whether they would be prepared to buy if Belarus issued a Eurobond.

In an interview with Reuters on Monday, Lukashenko, who has been in power since 1994 and allows only limited market reforms in the state-dominated economy, said Belarus had fulfilled all agreements with the IMF and was in talks on a possible new credit arrangement.

But he said he wanted the Fund to cease taking a political approach in its dealings with Belarus.

“If the IMF is a purely financial and economic organization we will reach an agreement with it. If it plays politics, we will be holding talks for a long time,” he said.

“As soon as the IMF gets away from political cliches and political criteria in its approach to Belarus, we will reach an agreement in 24 hours,” he added.

Belarussian authorities say they believe the Fund is stalling on providing a new program to replace a $3.5 billion package, which ended in 2010, because of the leadership’s poor relations with the European Union.

Lukashenko and his inner circle have been placed under travel sanctions by the EU and Washington because of a crackdown on the political opposition at home.

The IMF has been sharply critical of the economic course pursued by Lukashenko.

A visiting IMF mission last month urged Belarus’s central bank to raise interest rates and criticized a government plan to boost public sector wages which would put pressure on prices and the rouble’s exchange rate.

Lukashenko spoke before Belarus briefs Asian investors this week on a potential Eurobond issue of $500-$600 million that might be placed early next year to refinance debts.

Yields on Belarus’s two sovereign Eurobonds, together worth $1.8 billion, soared during the financial crisis but have since fallen back to single-digit levels. A rapprochement with the IMF would ease the country’s access to capital markets.


Sharp wage rises on the eve of a presidential election in December 2010 when Lukashenko secured a fourth successive term in power were widely seen as contributing to an acute balance-of-payments crisis the following year.

The crisis forced Minsk to take a bailout package from ex-Soviet ally Russia in exchange for pledges to allow the privatization of key state companies that could interest Russian investors and the sale of the Belarussian gas pipeline network.

Heavy borrowing led to a record growth in external debt which now stands at around $12 billion, $3 billion of which is scheduled to be repaid next year. Of this, $1.6 billion are repayments to the Fund due under the old program.

Lukashenko, replying to a question on where new money could come from, shrugged off possible difficulties in repayments.

“With GDP (gross domestic product) at $60 billion and a budget of $20 billion, this is not a big problem. We have agreements that if we need a billion or less we can refinance and agree to a postponement. We agreed with our creditors that we can delay repayment of these loans,” he said.

At the beginning of autumn, the Belarussian rouble hit fresh volatility, money market rates rose and rouble deposits fell. The central bank responded by cutting the refinancing rate and urging banks to limit lending.

“We had to use market instruments. We raised credit rates ... We had to use these unpopular methods and this to a certain extent was reflected in the economy,” he said.

Over the past 10 months, economic growth has slowed to 2.2 percent from just over 7 per cent in the same period of last year.

But Lukashenko stood by an earlier forecast of 5 percent growth for this year. “There is no problem with ensuring growth of 5 percent. This is the minimum which we can achieve,” he said

Belarus is forecasting growth at 8.5 percent next year.

Writing by Richard Balmforth; Editing by Douglas Busvine and Ruth Pitchford