MINSK, April 20 (Reuters) - The Belarussian rouble <BYR=> lost more than a third of its value against the dollar on Wednesday after the central bank introduced a free floating exchange rate for trade between banks.
The development starkly highlighted the currency problems of the ex-Soviet republic and amounted to a setback for President Alexander Lukashenko who was due on Thursday to deliver his annual state of the nation speech.
Coming nine days after a bomb blast at a Minsk metro station that killed 13 people, the rouble’s fall against the dollar piled on the misery for the average Belarussian citizen who was promised better times ahead when Lukashenko was re-elected for a fourth term last December.
Bankers said the rouble on Wednesday plunged in value to 4,800 to 5,300 per dollar in trading on the interbank market.
This compared with the official exchange rate of 3,074 roubles per dollar.
Dealers said demand for dollars on the market had surged after Belarus dropped restrictions on the rate used by banks and companies on Tuesday, opening the door to a partial devaluation of the currency.
"There is a lot of delayed demand (for dollars)," one trader said.
He warned that the one-off surge, which reflects the fact that many players had not been able to buy dollars for weeks, may ease off, pointing to the rouble recovering some ground.
While ordinary citizens in theory can exchange roubles at the official rate, the reality is that supply of dollars from official exchange points has dried up, forcing ordinary people to buy roubles on the street at black market rates.
The other implication is that prices of imported goods will probably continue to rise — prices for goods ranging from food to computers are up more than 20 percent since the start of April.
DRAINING RESERVES
Belarus has lost a quarter of its foreign currency reserves this year, trying to support the rouble as its current account deficit soared, partly under the impact of high pre-election spending late last year.
In past weeks, as the supply of dollars has run out, Belarussians have been queuing for hours at exchange points to acquire whatever foreign currency was available.
If the rouble stays down at around 5,000 to the dollar, the flow of dollars to these retail outlets is liable to dry up completely since they are only allowed to operate at around the official rate.
Exporters, too, still have to sell 30 percent of their foreign currency revenue to the central bank at the official rate.
The central bank can then resell it to banks or companies it picks, also at an artificially low rate.
Lukashenko, who is at odds with the West over a police crackdown on the opposition following his disputed re-election last December, promised to bring the average monthly wage to 500 dollars in 2010 and double it by 2015.
But this will be almost impossible to achieve if the rouble continues to depreciate.
The central bank and government has said that they expect gradually to unify the market in one exchange rate once it settled down from the initial moves.
Foreign analysts estimates for how much the rouble needs to fall in fundamental terms were around 20-30 percent, less than Wednesday’s slump.
In Thursday’s state of the nation speech, Lukashenko seems likely to blame rising energy prices for the current economic problems and opposition forces whom he regularly accuses of sowing panic among the population. Lukashenko blamed the April 11 metro bombing on forces which he said were intent on destabilising the country.
After announcing the arrest of the main suspects, he said opposition leaders should also be questioned over the bombing.
