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. Last Updated: 07/27/2016

Belarussian Currency Takes Plunge

MINSK, Belarus -- The Belarussian ruble nosedived 30 percent Thursday to 230,000 to 260,000 to the dollar in trade on the nonresident interbank exchange, bringing its total decline to 70 percent in two weeks.

Economy Minister Vladimir Shimov blamed the fall on the financial collapse in neighboring Russia, but some dealers said it was being fueled by the government's printing of money to fund a big budget deficit and socialist-style building programs.

"There is panic on the market. This is the end of the Belarussian ruble," one local dealer said.

On Wednesday, the currency had traded at 150,000 to 160,000 to the dollar.

The decline has outstripped even the Russian ruble's 62 percent fall to the dollar since Moscow pitched into a deep financial and political crisis in mid-August. The Belarussian ruble was then trading freely at 70,000 to 80,000 to the dollar.

"[Belarussian] rubles are melting in people's hands. Everyone is trying to convert them at any price," the dealer said.

There is an official exchange rate of 50,200 to the dollar, but this is largely irrelevant to consumers and is mostly an accounting device used by big state-owned enterprises.

"We are obliged to orient ourselves toward the rate of the National Bank, but the collapse of the zaichik is objective and reflects to a great extent the emission [of money] begun by the Central Bank, not the crisis in Russia," the dealer said.

The Belarussian ruble is popularly known as the zaichik, which means bunny rabbit.

Economy Minister Shimov flatly disagreed.

"The decline has been precipitated by the growing political uncertainty in Russia. Unfortunately, the dominating nature of our relationship with Russia has pulled us into the orbit of her crisis," he said. Belarus sends 70 percent of its exports to Russia, with which it has a customs union.

Authoritarian President Alexander Lukashenko has beat a determined path toward close integration with Moscow and has stuck to a command-style economy despite hoots of derision from the West. Disillusioned organizations such as the International Monetary Fund have simply packed up and left Belarus.

However, many Belarussians approved of Lukashenko's promise of Soviet-style cradle-to-grave security.

Lukashenko has remained defiant. Earlier this year, he appointed a former swamp drainage expert, who conceded he had limited knowledge of banking in general, to head the National Bank.

Shimov dismissed any suggestion the roughly 70 percent fall of the national currency in just two weeks was anything to worry about.

"We are defended by the official exchange rate, therefore the fall of the Belarussian ruble will not lead to a crisis," he said at a news conference, adding that the currency could plummet even further.

"This spread [between the official and floating rates] could be bigger. Fluctuations on the uncontrolled market are possible. But only a small number of our enterprises work by the [floating] rate," he said.

State stores sell a very limited number of items, including one type of cheap sausage and bread, at fixed prices. Most other goods are subject to market forces and many will inevitably rise in price.