Belarus has asked the International Monetary Fund for a loan of up to $8 billion to stabilize its plummeting economy, the government said Wednesday as it struggles to manage the country's most severe financial crisis since the Soviet collapse.
Prime Minister Mikhail Myasnikovich said the country is counting on striking a low-interest loan deal of anywhere between $3.5 billion and $8 billion. Analysts say at least $9 billion is needed to get the economy back on track.
"This is an SOS signal from the Belarusian government, which is losing control of the situation," said Stanislav Bogdankevich, former head of the National Bank.
Panic spread across the country last week, when the National Bank cut the value of the Belarusian ruble against the dollar almost in half. Belarusians have been rushing to buy up goods and lining up for days at currency exchange offices to get dollars and euros in a desperate attempt to protect their savings.
On Wednesday, the government issued a decree freezing prices on staples such as fish, cheese, tea and coffee and some fruit and vegetables.
The IMF, which issued Belarus loans amounting to $3.5 billion in 2009-2010 to help it weather the impact of the global financial crisis, is studying the country's finances and is expected to produce a report in mid-June.
An IMF spokesperson, Olga Stankova, said the Fund's mission visiting Belarus will "discuss policies that would restore economic stability and put the economy on the path of strong and sustainable growth."
"The mission will use the opportunity to exchange views with the authorities on possible next steps in response to their request for the Fund-supported program," she said in a statement.
Observers pin much of the blame for the country's financial woes on authoritarian President Alexander Lukashenko, who oversaw an increase in social spending before his re-election late last year. The IMF cited that as a key drag on the economy.
Belarus is hoping for a $3 billion loan from Russia but the Kremlin has been dragging its feet, insisting it will lend Minsk money only if the country sells up to $7.5 billion worth of its key state-owned enterprises over the next three years. A decision is expected to be announced later this week.
Russia is reportedly seeking to capitalize on Belarus' vulnerability by acquiring major stakes in energy assets such as Beltransgas, the state-owned gas pipeline network that supplies domestic homes and forwards the gas to Europe. Russia's state energy giant Gazprom already owns 50 percent in Beltransgas, and is demanding the remaining 50 percent as part of the deal.
Russia's Finance Minister Alexei Kudrin warned Belarus last month that it is in no position to turn the deal down because it is ill-equipped to meet the tough terms for any IMF loan.
For most of his 17 years in power, Lukashenko has relied on Russia _ Belarus' main sponsor and ally _ to maintain a quasi-Soviet economy complete with a social safety net that helped maintain his popularity.
But the Russian subsidies have dwindled recently as Moscow pushes for control over Belarus' most prized economic assets.