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UPDATE 1-IMF approves $2.46 billion loan for Belarus

Published 01/12/2009, 03:43 PM
Updated 01/12/2009, 03:48 PM

(Adds details from news release, IMF conference call)

WASHINGTON, Jan 12 (Reuters) - The International Monetary Fund on Monday approved a $2.46 billion financial rescue package for Belarus and said a further devaluation in the Belarussian currency would probably not be necessary.

The IMF said it will immediately disburse the first tranche of $787.9 million under the 15-month standby loan deal aimed at stabilizing the ex-Soviet republic's economy, which has been hit by the global financial crisis.

"The main objectives of the IMF-supported program are to facilitate an orderly adjustment to external shocks and to address pressing vulnerabilities," the IMF said.

"The program contains strong macroeconomic adjustment measures and addresses a number of structural issues that are critical to the adjustment and mitigation of vulnerabilities," it added.

Juha Kahkonen, the IMF's mission chief to Belarus, said a 20 percent devaluation earlier in January of the Belarussian rouble was appropriate and will make exports more competitive.

He said pegging the rouble to a new currency basket means that another devaluation won't be needed in response to movements in other currencies.

Also, setting interest rates above the expected rate of inflation should give people confidence their savings will maintain their value, he added.

"This month's devaluation was appropriate given that the Belarussian currency was somewhat overvalued," Kahkonen told a conference call.

"This devaluation, together with accompanying wage restraint and the right fiscal and monetary policy, will correct the overvaluation and set the stage for an improvement in the current account," he said, adding, "So we do not expect another devaluation."

He sad Belarus's economy will likely slow sharply in 2009/2010 with gross domestic product expected to grow in a range of 1 to 2 percent after reaching 10.5 percent in 2008. Inflation is likely to slow to 11.5 percent in 2009.

Kahkonen said the IMF expects Belarus' currency reserves to increase over the 15-month period of the IMF program. (Reporting by Lesley Wroughton; Editing by James Dalgleish)

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