Guy Norton in Zagreb -

Despite remaining a largely centrally planned economy, Belarus hasn't been immune to the fallout from the global credit crunch and the associated macroeconomic slowdown.

At the beginning of the year, the country was forced to devalue the Belarusian ruble by 20% to BYR2,650 per dollar and raise its key refinancing rate from 12% to 14%. The move came in the wake of growing pressure on the currency as a result of falling exports and growing demand for dollars among the population, which forced the authorities in Minsk to use up $1.33bn of precious gold and foreign exchange reserves in 2008 to maintain the currency above BYR2,000 per dollar.

The devaluation of the Belarusian ruble and the hike in interest rates comes in the wake of an agreement with the International Monetary Fund for a $2.5bn standby arrangement. Under the terms of the emergency loan package, the government had to sanction a strengthened monetary and exchange rate policy framework, cuts in public investment and directed lending by banks, and public sector wage restraint. As part of the deal, the administration led by authoritarian President Alexander Lukashenko also agreed to devalue its managed currency, cut budget spending and recapitalize its banks.

Although the Belarusian economy is still mainly in state hands, in recent years there have been growing moves toward privatization and liberalization, which have helped to boost output. According to Petr Prokopovich, chairman of the National Bank of Belarus, GDP growth reached 10.5% in 2008. Over the same period, investment increased 23.1%, while bank lending expanded by over 50%.

In the wake of the devaluation, President Lukashenko emphasized that measures to open up the economy would continue. In a statement released by the government press service, he said: "We live in new conditions and see new requirements. We must give businesses more freedom." As a result, Belarus is set to move closer to what Lukashenko terms "a socially-oriented market economy." As part of that vision, Lukashenko is looking to actively pursue import substitution policies designed to bolster the profitability of domestic producers. In particular, Lukashenko believes the country should minimize the import of components by engineering and machinery companies. "We can make them here. It means a colossal number of jobs in small towns. We could reanimate old companies that work poorly."

In another move to boost the country's attractiveness as an investment destination the government is slashing red tape. As of February 1, Belarus introduced same-day registration for all new businesses, with the exception of bank and non-bank financial institutions. Furthermore, new business registrations will require just three documents - a registration application from, a company charter and a letter confirming the payment of state duties.

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