Bloomberg News

Belarus Adopts ‘Managed’ Ruble Float, May Raise Main Rate

October 20, 2011

(Updates with central banker quote in second paragraph.)

Oct. 20 (Bloomberg) -- Belarus’s central bank will operate a “managed float” of the ruble to smooth volatility on the foreign-exchange market and may increase the world’s highest interest rate for an 11th time this year.

The ruble slid to 8,680 per U.S. dollar from 5,712 after the official government exchange rate was unified with a free- floating rate introduced last month. The central bank expects the currency to appreciate and would like it to reach 7,000- 8,000, Chairman Nadezhda Ermakova said today.

“The exchange rate will be determined on the basis of supply and demand, with minimal intervention from the Natsionalnyi Bank to prevent sharp movements,” Ermakova told reporters in the capital, Minsk. “Interventions can be in both foreign currencies and in rubles.”

The former Soviet republic was granted a $3 billion bailout loan by the Russia-led Eurasian Economic Community in June as it grappled with a balance-of-payments crisis that forced a 36 percent devaluation of the ruble the previous month. The central bank has raised its refinancing rate, the highest among those countries tracked by Bloomberg at 35 percent, 10 times since January as the weaker currency stokes inflation.

Belarus’s $1 billion of bonds due 2015 fell, snapping a four-day winning streak and sending the yield 35 basis points higher to 16.14 percent.

Reserves to Rise

Belarus’s gold and foreign-exchange reserves, which rose by $134.9 million last month to $4.7 billion, may increase by a further $4 billion by year-end, Ermakova said.

The sale of a 50 percent stake in pipeline operator Beltransgaz to Russia’s natural-gas export monopoly OAO Gazprom may generate $2.5 billion of that, while Belarus may borrow $1 billion from OAO Sberbank and is due to receive a $440 million tranche of its Eurasian Economic Community loan, she said.

While Belarus has asked the International Monetary Fund for a bailout loan, its application may be rejected after courts jailed opposition politicians, according to Ermakova, echoing comments by President Alexander Lukashenko.

The IMF in a statement Oct. 17 called the merging of the country’s exchange rates “another very important step forward” and denied that an emergency loan would carry political requirements. The Washington-based fund expects Belarus’s economy to expand 5.5 percent this year and 1.4 percent in 2012,

“In order to stabilize our economy, we will need to live very modestly in 2012,” Ermakova said.

--Editors: Andrew Langley, Alan Crosby, Andrew Atkinson

To contact the reporters on this story: Aliaksandr Kudrytski in Minsk, Belarus at akudrytski@bloomberg.net Milda Seputyte in Vilnius at mseputyte@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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