Cash-strapped Belarus seeks another IMF rescue

Belarussian President Alexander Lukashenko is seen in January 2011. Belarus has asked the International Monetary Fund for a rescue loan to bail it out of a growing economic crisis that has seen currency devaluation and consumer panic - AFP

"The Belarus government and the National Bank of the Republic of Belarus on May 31, 2011 sent an application to the International Monetary Fund for the extension of a stabilisation loan," the Belarus government said in a statement.

Prime Minister Mikhail Myasnikovich said he expected aid of $3.5 to $8 billion over three to five years -- the lower figure similar to the $3.45 billion in 2009 agreed to keep the country afloat during the worst of the global economic crisis.

Minsk's approach to the IMF reflects the severity of the economic crisis in the republic of 10 million people and represents a major U-turn by the country's leadership.

Authoritarian President Alexander Lukashenko last month demanded to know why he would subject his government to the stiff terms likely to be sought by the IMF and insisted he would never seek Western help.

Belarus appeared to have timed the request to coincide with the presence of an IMF mission in the country for the next two weeks on a previously scheduled trip.

The IMF did not give any clue over how it would view the request but confirmed that it had received the approach from Minsk and that the issue would be discussed during the mission's visit.

"The mission will use the opportunity to exchange views with the authorities on possible next steps in response to their request for the Fund-supported program," IMF spokeswoman Olga Stankova said.

The foreign minister of Sweden -- which with Poland is spearheading a democratisation programme for Eastern Europe -- said Minsk's call for help marked an important moment in the West's difficult relations with Lukashenko.

"Belarus has been forced to ask for IMF help. Collapse complete," Swedish Foreign Minister Carl Bildt wrote in his Twitter account.

"But politics must change. Otherwise no help," Bildt said in reference to Lukashenko's crackdown on the opposition and his control of the media.

As well as political pressure from the West, the IMF is expected to make radical economic reform and austerity measures the condition of any package.

"The IMF will recommend we lift the recently-imposed price freezes, once again sharply raise the main refinancing (interest) rate and of course step up the privatisation programme," a government source told the Interfax news agency.

The country's economic problems intensified after a disputed December election handed Lukashenko a victory so controversial it even soured his relations with traditional ally Russia.

Moscow has since refused to offer direct assistance to Minsk and demanded that Lukashenko approve a privatisation programme that could see Russian firms take over large swathes of its neighbour's economy.

Lukashenko appeared to be running out of options and increasingly blaming his domestic problems on foreign foes.

He promised to kick Russian media out of Minsk and demanded that a better work ethic be introduced at the country's state-run enterprises.

But a series of dramatic economic decisions betrayed a sign of panic among Lukashenko allies never seen during his nearly 17-year rule.

Lukashenko agreed to devalue the local ruble by 36 per cent last month after repeated vows to defend it.

Interest rates were hiked last week by a stinging two percentage basis points to 16 percent and the government admitted that annual inflation would this year hit 39 percent under its optimistic forecast.

It has also slapped price caps on basic staples such as salt and vinegar to prevent hyperinflation as consumers seek to convert their depreciating currency into actual goods.

Lukashenko's troubles at home have been compounded by a still-unclaimed bomb blast that killed 15 people on the Minsk metro in April and sparked another wave of detentions by the Belarus police.