Belarus is headed for an economic "meltdown," and the Belarussian ruble will need to drop another 51 percent as the former Soviet republic's import-dependent economy is starved of foreign currency, according to Russia's second-largest bank.
The Belarussian central bank let the managed ruble weaken 36 percent versus the dollar on Tuesday as demand for foreign currency from importers and households threatened to derail an economy already laboring under a current-account deficit equal to 16 percent of gross domestic product.
Russia and other former Soviet partners last week agreed to give Belarus a $3 billion loan and urged President Alexander Lukashenko's government to sell $7.5 billion of assets to replenish the state's coffers.
"A '91-style meltdown is almost inevitable," said Alexei Moiseyev, chief economist at VTB Capital, the investment-banking arm of Russia's second-largest lender, the state-owned VTB Group. "Rapid privatization is the only way that can help avert complete disaster."
The Belarussian central bank set its official dollar-ruble rate at 4,931 for today's trading, from 3,155 on May 23, according to its web site. Trading of foreign currency between companies, banks and individuals needs to stay within a 2 percent range of the daily rate, the regulator said May 23, when it announced the devaluation and reintroduced restrictions lifted on the interbank market on April 19 and for households on May 11.
Devaluing the currency will only worsen the situation for Belarus, VTB's Moiseyev said. "The main problem is that the economy produces goods which consist of little else than a combination of imported spare parts," he said. "So devaluation only makes things worse."
Belarus' economy effectively collapsed in 1991 as the disintegration of the Soviet Union eliminated natural markets for the country's exports of farm machinery, textiles and agricultural products.