MINSK-Cash-strapped Belarus announced yesterday that it would allow its beleaguered national currency to float, effectively permitting its devaluation in a bid to ease a spiraling currency crisis.
International financial institutions have been calling for a sharp devaluation of the Belarusian ruble to help the former Soviet republic's foundering economy. The move was the latest blow to authoritarian President Alexander Lukashenko's attempts to show he can still deliver economic stability after 17 years in power.
The currency crisis, an increasingly severe crackdown on the opposition-including the arrest yesterday of a human rights activist on suspicion of involvement in a subway bombing last week-have spawned a sense of rising panic and disorder in this nation of 10 million, often labeled the last dictatorship in Europe. Belarus' first post-Soviet leader, Stanislav Shushkevich, told The Associated Press that Lukashenko's political survival now hinges entirely on another Russian loan. "He will be able to ease social tensions if the Kremlin gives him another loan," Shushkevich said. "Otherwise people will start protesting. What we are seeing now begins to resemble the collapse of the Soviet system." The government's hard currency reserves plunged 20 percent in the first two months of the year to less than US$4 billion, and staples such as vegetable oil and sugar started vanishing from stores as people started to hoard.
Starting next week, banks will be able to buy and sell the Belarusian ruble at a rate determine in open trading, Central Bank deputy chief Nikolay Luzgin said, adding that the government will "take extra steps to balance the situation on the domestic currency market" after next week's trading. The US dollar stood at 3,074 Belarusian rubles yesterday. Stanislav Bogdankevich, former chief of the Belarusian central bank, told The Associated Press that he expects the ruble to drop by one-third after the float. Importers of medicine and Russian natural gas will be able to buy foreign currency at privileged rates. Even before the announcement, frightened citizens had been lining up for hours in the past few weeks to exchange their rubles for euros and dollars. Since the free float will initially affect banks, it was unclear how currency rates on the street will be affected. "My short-term plan is to emigrate to Poland," said Pavel Korchevsky, 37, a businessman. "It's impossible to do business in a country where the president personally determines the dollar rate."
Belarusian authorities also announced sharp budget cuts Tuesday, reducing financing for investment programs by 30 per cent and state office construction by 20 per cent. A long-standing social contract that asked Belarusians to give up their political freedoms in exchange for safety and a modest standard of living now appears to be fraying. The April 11 explosion in the capital's busiest subway station during an evening rush hour killed 13 and wounded more than 200-the first deadly bombing in a nation where the opposition has been largely peaceful and militant groups have been unheard of. Authorities quickly arrested a man accused of placing the bomb and four suspected accomplices, but haven't said who ordered the attack. (Reuters)