* IMF wants wage restraint, higher interest rates* Ex-Soviet republic hit by high inflationBy Andrei MakhovskyMINSK, Oct 17 (Reuters) -
The International Monetary Fund on Monday stressed the need to
restrain wage growth in Belarus and said the leadership of
President Alexander Lukashenko would have to show clear
commitment to reform if it hoped to secure new IMF credit.The ex-Soviet republic is in the grip of a severe financial
crisis which has drained its foreign currency reserves, forced a
65 percent devaluation in the national currency and pushed
inflation up to 75 percent in the year to date.Minsk has put out feelers for a possible new stand-by credit
programme from the IMF of up to $7 billion, according to
financial sources.Chris Jarvis, head of a visiting IMF mission, said that
while the Fund applauded the partial floating of the Belarussian
rouble as “an important step forward” there was a danger that
gains could be wiped out by high inflation.Speaking to journalists, he said Belarus had to raise
interest rates more sharply and the authorities should refrain
from any further public wage increases.The IMF wants Belarus, which is run for the most part on old
Soviet lines, to carry out structural and economic reforms to
fully liberalise the economy.”The authorities should also continue with and accelerate
their work on structural reform, especially enterprise reform,
privatization, price liberalization and banking sector reform,”
Jarvis said in a statement.”Deep structural reform is needed for Belarus to achieve
strong and lasting growth and to increase living standards in a
durable way,” he added.FOLLOW-UP ACTION NEEDEDIn a comment angled at Lukashenko, Belarus’s authoritarian
leader, Jarvis said the country’s “highest” authorities had to
show a clear commitment to reforms and follow through with
action if a fresh programme was to be forthcoming from the Fund.”Before programme negotiations could begin, as a first step,
the authorities will need to demonstrate a clear commitment,
including at the highest level, to stability and reforms and to
reflect this commitment in their actions,” he said.He implicitly criticised Lukashenko for raising public
sector wages shortly before an election last December in which
he won a fourth consecutive term in power, which is disputed by
the political opposition and in the West.”Wage restraint is … crucial. The role of the November
2010 wage increase in contributing to the crisis … is now
widely recognised,” he said.After a previous IMF programme had been completed in 2010
there had been a softening in economic policy especially in
credit policy and in the pay sector, he said.Belarus has introduced special free-trade sessions for the
rouble, while maintaining a separate official exchange rate
tightly controlled by the central bank.While this official rate stood on Monday at 5,692 roubles
per dollar, it was down at 8,990 per dollar in the
free-float trading session, up slightly from its low point of
9,010 last Friday.The Fund wants the national currency to be able to trade
freely across the board and authorities are indicating they may
meet the IMF on this point.A senior government official said on Saturday that
Belarus would lift administrative caps and reinstate free
currency trading.”The government along with the National bank made the
decision to carry out all currency trading in one session
starting Oct. 20 … with a flexible exchange rate regime,”
Deputy Prime Minister Sergei Rumas told Belarusian STV channel.”The government will not use administrative measures to
influence the currency exchange regime,” he said.The government curbed free currency trade in March in an
effort to rescue the rouble, which nevertheless was subsequently
devalued twice, losing 65 percent of its value in all against
the dollar.
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