Bloomberg News

Belarus Cuts World’s Highest Rate for First Time Since 2010

February 13, 2012

(Updates with economist comment in fourth paragraph.)

Feb. 8 (Bloomberg) -- Belarus cut borrowing costs for the first time in 17 months after President Aleksandr Lukashenko said the economy can no longer tolerate the world’s highest benchmark interest rate.

The central bank will reduce the refinancing rate to 43 percent from 45 percent, effective Feb. 15, the Natsionalnyi Bank Respubliki Belarus said in an e-mailed statement today. The rate was last lowered in September 2010 before a balance-of- payments crisis prompted 12 increases by a cumulative 34.5 percentage points.

Lukashenko urged policy makers to “gradually decrease” the rates again because the economy can no longer withstand their impact on the credit market, according to a television interview with state-run STV Feb. 6. The former Soviet republic was tightening policy to arrest capital outflows and combat inflation that soared to 108.7 percent last year as a foreign currency squeeze fanned price growth. The country’s gold and foreign-currency rose to a record $7.968 billion last month.

“This is a bit earlier than expected given where inflation is, but the bigger picture tells us that things are gradually improving there,” Ivan Tchakarov, chief economist for Russia and the Commonwealth of Independent States at Renaissance Capital in Moscow, said by e-mail. “A 2 percent cut for me is more a verbal intervention rather than a big act of monetary accommodation, but it does signify that the authorities are feeling more comfortable with the economic backdrop.”

Inflation Slows

Consumer-price growth decelerated for a fourth month in January, Deputy Economy Minister Aleksandr Yaroshenko told reporters in Minsk today. He reiterated an earlier forecast for full-year inflation of no more than 22 percent.

Prices rose 109.7 percent from a year earlier in January. Inflation reached 13.6 percent from the previous month in September, state statistics committee data show.

The Belarusian ruble has appreciated 5.7 percent to 8,400 per dollar since reaching last year’s peak of 8,875 against the greenback Nov. 11. The yield on the country’s $1 billion of bonds due 2015 dropped 20 basis points, or 0.2 percentage point, to 10.636 percent as of 1:31 p.m. in Minsk, the lowest on a closing basis since May 26.

Belarus’s 2015 bonds yield 100 basis points more than similar-maturity notes issued by Ukraine, down from a gap of 1,189 basis points on Sept. 26.

Vietnam has the second-highest benchmark rate in the world, according to data compiled by Bloomberg, at 15 percent. Belarus will probably continue cutting “in a very gradual and cautious manner” this year, Renaissance Capital’s Tchakarov said.

--Editors: Paul Abelsky, Hellmuth Tromm

To contact the reporters on this story: Jack Jordan in Moscow at; Aliaksandr Kudrytski in Minsk, Belarus at

To contact the editor responsible for this story: Gavin Serkin at

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