Azernews.Az

MINSK – Chinese banks will lend Belarus over $1 billion to finance industrial and infrastructure projects, the Belarussian government, which is struggling to keep a currency crisis in check, said on Tuesday, Reuters reported.

The deal is likely to be linked to supplies of Chinese goods and services and thus contribute very little towards Belarus's efforts to plug its large current account deficit.

But the investments could help the Minsk government prop up economic activity at a time when it cutting spending and tightening monetary policy.

China's Eximbank and the Industrial and Commercial Bank of China will provide $654 million towards a $700 million cellulose plant construction project as well as $340 million for a road improvement project, Deputy Prime Minister Anatoly Tozik said.

The banks will also finance a smaller railroad electrification project, he said.

The plant, due to be built in two years, will have the capacity to produce 400,000 tonnes per year of cellulose, used in paper and cardboard production. Belarus consumes just 200,000 tonnes a year.

"We are discussing the possibility of repaying the loan by supplying extra cellulose to China," Tozik said.

Belarus devalued its rouble BYR= by 36 percent last month after losing a quarter of its foreign currency reserves this year.

It has since pledged to halve its budget deficit and sell off state assets in order to secure a $3 billion loan programme from a Russian-led regional bailout fund. Minsk is also seeking an IMF loan of up to $8 billion.