Belarus to Relax Rule on Banks' Interest Rate Setting

Belarus's central bank will scrap a recommendation limiting commercial banks' interest rates to no more than three percentage points above its key refinancing rate as of next year, the bank said on Tuesday.

"This decision was taken so that banks could react to the changing situation faster ... The situation on financial markets is changing very quickly at the moment," Anatoly Drozdov, the central bank's chief spokesman, told Reuters.

Although this had been only a recommendation, commercial banks never set interest rates above the limit. On Monday, the central bank raised its refinancing rate to 11 percent from 10.75 percent.

Ex-Soviet Belarus is currently seeking an International Monetary Fund loan of about $2 billion as a "precautionary measure" against the impact of the global financial crisis.

For years, Belarus retained its Soviet-style command economy, but has in the past year tried to move closer to the West diplomatically and through opening up its markets.

At the end of last month, veteran leader Alexander Lukashenko told his government it should not be afraid of liberalising the economy in the face of the crisis.

In the past year, Belarus has received its maiden sovereign credit ratings, though it has been unable to issue a Eurobond, and has sold two large telecom operators for a total of $1.5 billion to an Austrian and a Turkish firm.

Statistics ministry data showed on Tuesday the economy grew 10.7 percent in January-October against 8.3 percent in the same period last year. The government is targeting year-end growth of 11 percent against 8.2 percent in 2007.

Data also showed month-on-month inflation was 1 percent in October, the same as in September, and accumulated price rises reached 10.5 percent. The government raised its inflation forecast several months ago to 14 percent by year-end.

(Editing by Ruth Pitchford)