The Belarusian ruble reached a new record low on January 21 following the collapse of the Russian ruble, which has been pushed down to its lowest value since 1998 by plunging global oil prices.

The Belarusian currency lost 13.9% of its value since January 1, when it stood at BYR18,569 per US dollar, to reach BYR21,564 per dollar, according to official exchange rates set by the National Bank of Belarus (NBB).

The Belarusian economy is heavily dependent on its key trading partner Russia, which has been hard hit by the plummeting oil price, with Brent crude touching $27.3 per barrel in recent days. The resultant weakening of the Russian ruble had a predictable knock-on effect on the Belarusian domestic currency.

In 2015, the GDP of Belarus dropped by 3.9% y/y as the country's industrial giants were badly hit by the recession in Russia. According to the World Bank, GDP will lose 0.5% in 2016, while the European Bank for Reconstruction and Development (EBRD) predicts a 1% decline.

IMF to the rescue?

Some experts believe the Belarusian ruble's current slide could be considered as a preparatory measure for a new support programme with the International Monetary Fund (IMF).

"The IMF may insist on increasing the flexibility of the exchange rate of the Belarusian ruble," Alexander Mukha, a Minsk-based financial analyst, told bne IntellliNews.

Another sign of priming the ground with the IMF is the government's move to raise heating, electricity and gas prices for households by 20% since January 1, Mukha said. Public transport fares in Minsk as well as international train fares also increased.

The IMF has repeatedly urged Belarus to demonstrate "strong commitment at the highest level" to a comprehensive package of deep structural reforms and consistent macroeconomic policies. But talks have also repeatedly run into key sticking points with the country's long-term president Alexander Lukashenko, such as its high level of social spending.

However, Minsk now looks increasingly likely to secure a new loan of up to $3.5bn with the IMF instead of a bail-out package with the Russia-led Eurasian Fund for Stabilisation and Development (EFSD). The Belarusian government is simultaneously discussing credits with both lenders as its international reserves hit their lowest level since 2011, standing at $4.17bn as of the beginning of 2016.

On January 11, First Deputy Prime Minister Vasily Matyushevsky told Lukashenko that the government expects to secure a new support programme with the IMF in either January or early February.

Threat to the forecast

The latest developments undermine the government's optimistic take on the country's economic prospects in 2016. In particular, this applies to inflation forecast, which was projected at 12% in 2016, at the same level as it was in 2015.

According to a macroeconomic report published by Russia's Sberbank in January, Belarusian inflation may accelerate within the next few months because of an increase in utility rates and the government's move to lift price caps for a wide range of basic foodstuffs.

Meanwhile, the national authorities prefer to maintain their poker face. "In the current economic conditions some sharp spikes in prices are perhaps not to be expected," Pavel Filipov, a departmental head at the Trade Ministry, told journalists on January 21. Unlike previous times, the ministry does not expect panic demand for consumer goods due to the slide of the Belarusian ruble, he added.

The Belarusian government also predicts that GDP will grow at a minimum level of 0.3% if the oil price does not fall below $50 per barrel, and the Russian ruble rate stays at 63 rubles per US dollar - an ever slimmer likelihood given the importance of oil supply and prices in Russia's economy..