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Belarus currency plummets after free float (updated)

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Sept. 14, 2011, 3:32 p.m. | Russia and former Soviet Union — by Associated Press

A teller installs a note reading: "No foreign currency for sale" inside an exchange booth in Minsk, Belarus, Wednesday, Sept. 14, 2011.
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MINSK, Belarus (AP) —The Belarusian currency plummented in value Wednesday after the government allowed a limited free float in a bid to ease the country's spiraling financial crisis. Residents desperately tried to buy other currencies but few were to be found. The Belarusian ruble weakened sharply to 8,600 rubles to the dollar compared with the official rate of 5,347 rubles. On the black market, the battered currency had been trading around 8,000 per dollar.

The official rate remains in use for some transactions, mainly state-owned factories and businesses needing to buy imported materials, but all other currancy trading will use the floated value.

Belarus is mired in its worst financial crisis since the 1991 fall of the Soviet Union. Authoritarian President Alexander Lukashenko's government already had devalued the ruble by some 50 percent this year, causing panic buying of staples and huge lines at foreign exchange offices.

Critics blame Lukashenko for triggering the financial turmoil by raising public sector wages by one-third last year in a populist move to insure his re-election in December.

Taras Nadolny, a deputy head of the National Bank, said the bank didn't intervene Wednesday to support the ruble.

Some experts have criticized the government for maintaining multiple exchange rates.

"The catastrophe is continuing and the government keeps making half-steps," former National Bank chief Stanislav Bogdankevich told The Associated Press. He said Belarus urgently needs $8 billion in loans to stabilize its financial system.

The crisis has eroded the authority of Lukashenko, who has ruled the 10-million nation with an iron hand for more than 17 years, earning the nickname of "Europe's last dictator" in the West.

"Lukashenko has cheated us, and my trust in him is disappearing as my pension is losing its value," said Galina Grigorovich, a 68-year old retiree who stood outside an exchange booth in the Belarusian capital of Minsk, hoping to buy hard currency.

But there was no hard currency on sale in that and most other street exchange offices in Minsk on Wednesday, despite the ruble being allowed to float freely on the exchange.

Belarus in June asked the International Monetary Fund for a loan of up to $8 billion. The IMF said in a statement issued Wednesday after a review of Belarus' economic policies that the nation would need to demonstrate its commitment to strong policies and structural reforms to qualify for the Fund's assistance.

Belarus neighbor and ally, Russia, has promised $3 billion in loans to Belarus under the umbrella of an economic alliance of several ex-Soviet nations and delivered the first $800 million of it.

Moscow, which is seeking to acquire controlling stakes in key Belarusian industrial assets, has urged Belarus to privatize its state-controlled assets to qualify for further aid disbursements.


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