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Amid Deepening Economic Crisis, Belarus Applies For IMF Loan


A woman buys cheese at a market in Minsk in late May.
Belarusian authorities have asked the International Monetary Fund (IMF) for a rescue loan to help tackle a spiraling financial crisis.

Prime Minister Mikhail Myasnikovich said the country was hoping for between $3.5 billion and $8 billion allocated over a period of three to five years.

The IMF, which issued $3.5 billion in loans to Belarus from 2009 to 2010, has sent a mission to assess the situation in the former Soviet republic.

Belarus' latest plea marks a humbling moment for authoritarian President Alyaksandr Lukashenka, who has faced international isolation and sanctions since a brutal crackdown on protests against his disputed reelection in December.

Belarus announced the application one day after temporarily freezing prices on a number of basic food staples and just days after devaluing its ruble by a staggering 36 percent.

The financial crisis was sparked by a rise in the price Belarus pays for Russian energy and a lavish public spending campaign ahead of the December 19 presidential election.

Belarusian President Alyaksandr Lukashenka

Belarus's central bank responded by lifting exchange-rate controls, which has sent the local currency plummeting.

This week, in a bid to shore up the ruble and stem spiraling inflation, the central bank raised its key interest rate by 2 percentage points to 16 percent.

The crisis has prompted people to start buying up staple foods and to form long lines at currency exchange offices in a bid to protect their savings.

Tough Days

The growing economic pressure represents one of the biggest challenges Lukashenka has had to face in his 17-year rule.

Russia has refused to grant Belarus a direct loan after subsidizing its Soviet-style economy for years in return for political loyalty and the delivery of Russian oil to Europe.

The two nations have recently sparred over energy prices, with Belarus threatening to expel Russian journalists.

Instead, Russia is offering a $3-billion rescue package to be issued by the Eurasian Economic Community (Eurasec), a Russia-dominated regional grouping that includes Belarus, Kazakhstan, Kyrgyzstan, and Tajikistan.

The group is scheduled to decide on that loan on June 4.

But Russian officials have clearly stated that Belarus would have to sell assets worth $3 billion this year.

This would enable Moscow to snatch Belarus's most-prized state firms, including its two big oil refineries, its gas-pipeline system, its main mobile-phone provider, and Belaruskali, a top potash producer.

Lukashenka has said he will never cede control of strategic assets at prices suggested by Russia. Prime Minister Myasnikovich also said today that an IMF loan would be 50-percent cheaper than the package proposed by Eurasec.

The crisis, however, has left Lukashenka with few options.

A potential IMF loan, however, is likely to come with equally stringent conditions for austerity measures and economic reform.

Ales Mikhalevich: "Deep crisis"
An indication of that came in the IMF's most recent assessment, where the fund called on Minsk to take some "difficult decisions."

While promoting political reform is not part of the IMF's mandate, Belarus' appeal has sparked hope within the opposition that the fund will seek to secure the release of activists -- including several former presidential candidates -- who have been jailed for taking part in the postelection protests.

Ales Mikhalevich, a Belarusian opposition leader who unsuccessfully ran against Lukashenka in the presidential election, called on the fund to make any loan conditional on the activists' release.

"There is a deep economic crisis in Belarus, and Lukashenka is interested in credits," he told a news conference in Brussels today. "The release of all political prisoners should definitely be a condition for any further discussions and cooperation with the regime."

Mikhalevich himself was jailed for attending the protests. After being freed on bail, he accused authorities of torturing him in prison and fled to the Czech Republic, where he was granted political asylum.

His call was echoed by Swedish Foreign Minister Carl Bildt, who said any IMF assistance should be tied to political reform.

"Politics must change," he wrote today in a Twitter post. "Otherwise no help."

written by Claire Bigg, with contributions from Rikard Jozwiak in Brussels
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