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. Last Updated: 07/27/2016

Belarus Sees Russia as Source of Investment

MINSK, Belarus -- Cash-strapped Belarus, languishing under political and financial isolation from the West, will turn to Russia's markets to secure vital funding, Belarussian Finance Minister Nikolai Korbut said Tuesday.

"We plan, in the first instance, to develop a system of borrowing through Russian market instruments," Korbut said in an interview.

"To begin with, this will be the issuing of short-term treasury bills and dollar-denominated promissory notes."

Western investors have largely shunned Belarus, worried about its authoritarian system and lack of economic reform.

The International Monetary Fund froze lending in 1996, and the country has since come under fire for preserving a Soviet-style command economy. The IMF resumed relations this year, but has warned Belarus about the cost of dragging its heels on reform, making the prospects of renewed funding remote.

Korbut said Belarus would turn to Russia, its giant eastern neighbor, with which President Alexander Lukashenko would like to form closer ties, including developing a currency union.

He said Western investment was unlikely on any major scale and the chances of Belarus going to European markets are slim, given the lack of support from the IMF and problems with credit ratings.

Belarus's first issue of treasury bills to Russian banks, a small-scale exercise worth $15 million, was well-received and snapped up within days, he said.

Markets also embraced a similar promissory note issue for Russian gas debts this year.

Korbut declined to give details on issue plans for 2002 but suggested they would not be less than those carried out in 2001. He said Belarus's main obstacle was building market confidence. "This is very painstaking work. For us, the main thing is that we are trusted," he said.

Government officials believe Belarus's low level of foreign debt and its success in talks on restructuring debts with Germany should help rekindle investors' trust. "Foreign debt continues to fall and at present totals $741 million, compared with $838.3 million at the start of the year. We see it falling considerably in 2002," Korbut said.

Official figures show Belarus's economy is staging a recovery, helped by improving conditions in Russia and Ukraine. The Belarussian Central Bank on Tuesday announced a cut in its main refinancing rate to 48 percent from 50 percent, effective Sept. 21.

However, the IMF has warned that structural reform is needed to sustain any pickup.

Independent economists question government figures.

Officially, Minsk has pledged to tread the reform path, although Western economists are skeptical that Lukashenko -- voted back in part for his promises to maintain state subsidies, salaries, employment and pensions -- will make the changes needed.

Korbut said relations with the IMF were improving and -- noting that Belarus's budget deficit was a low 1.7 percent of gross domestic product -- said the government hoped for a deal in 2002 on a standby credit.

"The IMF mission is at last listening to our arguments."