Azernews.Az

MINSK – The Belarus ruble lost nearly 40 percent of its value on Wednesday as the crisis-hit republic floated its currency for the second time in a year in the face of rapidly dwindling reserves, AFP reported.

The valuation followed a 36-percent easing in May and came despite earlier promises by President Alexander Lukashenko to keep the Belarus ruble stable at any cost.

The open market trading that went into effect on Wednesday is designed to stimulate the economy by bridging the gap between the official rate set by the state and a black market one used by most consumers and private businesses.

The National Bank said the ruble lost about 38 percent of its value against the dollar and 40 percent against the euro at the special session -- in line with a 30-50 percent devaluation predicted by the Moody's rating agency.

The currency has now lost about 65 percent of its value against the dollar on the open market since the start of May.

The isolated ex-Soviet country saw its economy thrown into crisis this year by a yawning budget deficit which emerged after the state went on a spending spree in the run-up to Lukashenko's controversial December re-election.

The authoritarian leader's popularity has rested on his ability to ensure social stability despite a lack of democratic freedoms and Lukashenko at first tried to arrest the ruble's decline by imposing an artificial exchange rate.

But the move only created conflicting exchange rates for various types of businesses and a booming black market currency trade.

The bank's deputy chairman Taras Nadolny told reporters that he expected the ruble to start clawing back some of its losses once the supply of hard currency available at the special trading sessions goes up.

"The National Bank is satisfied with how the trading proceeded," said the bank official. "There was no intervention on our part even though we reserve the right to do so."

Lukashenko's government had already appealed to the International Monetary Fund (IMF) for an $8-billion (4.4-billion-euro) lifeline.

But the IMF said on Tuesday that it would not be providing any loans to Lukashenko's authoritarian regime until it committed itself more firmly to reforms and Nadolny said Belarus may now decide to do without the fund's help.

"Belarus may recalls its application for new IMF funding," Nadolny told reporters. "We are managing on our own for now."

The new open trading sessions leave the country's complicated exchange rate system largely in tact for now.

The new rate of 8,600 Belarus rubles to the dollar still diverges from the 5,355 figure set by the National Bank for "official" operations involving state enterprises which import vital goods such as energy and drugs.

Private banks meanwhile remain free to set their own exchange rates.

"We encourage banks to adopt the market rate set at the session," said Nadolny. "But this is only a recommendation.

The IMF's Minsk mission chief Chris Jarvis called the latest currency easing a good "first step".

"It will be important that this is a genuinely free exchange rate," said Jarvis.

"I hope it is a first step toward unifying the exchange rate completely because that is something that we would need to see as part of a programme that can be supported by the IMF."

The fund plans to send a new mission to Minsk next month for the first round of policy discussions since June.