Publication: Monitor Volume: 6 Issue: 192

The National Bank of Belarus recently announced the unification of exchange rates of the Belarusan ruble, signaling progress in the effort to reform the nation’s economy (Reuters, September 13). Unifying exchange rates is a key component of both World Bank and IMF lending programs, and Belarus has now begun to discuss specific projects with the World Bank in energy, health care and other social issues. The move is also seen as a step toward economic reintegration with Russia, one of President Alyaksandr Lukashenka’s declared aims. The ruble rate was established on the basis of free market trading which occurred the following day, September 14. Restrictions on the purchase of hard currency were removed at the same time. Liberalization of the currency exchange market, in conjunction with tighter monetary policy, is designed to not only strengthen the ruble, but also draw more hard currency into the country, as well as raise inflows of foreign direct investment. As Belarus has been slow to adopt market reforms, the news was received positively by international lending organizations and commercial banks, as the country is now in a better position to address some of the structural flaws in its industrial and agricultural sectors. Such actions are seen as increasingly necessary in Belarus, which has experienced declining GDP growth since 1997. The Lukashenka regime is reluctant to hasten the pace of privatization, yet the central bank recognizes the need to tighten monetary and fiscal policies in order to achieve macroeconomic stabilization.

The central bank’s goal is to move to a crawling peg exchange rate by the end of the year, with the ruble pegged to either the US dollar or the Russian ruble. Part of this goal is to bring foreign exchange reserves up to US$500 million. Hard currency reserves stood at only US$99.5 million in August 2000. Belarus hopes to make up the difference through loans of up to US$400 million from both the IMF and Russia.