The authoritarian government of Belarus is to privatise 244 state-owned companies, including machine tool, power generating and construction plants, according to the state news agency Belta, in an attempt to tackle dwindling foreign currency reserves, an exploding trade deficit and growing fiscal imbalances.
Alexander Lukashenko, who has ruled the former Soviet republic of 10m people for 16 years, has been reluctant to undertake reforms that would threaten his rule, but his country's increasingly dire financial situation is forcing his hand.
The country's central bank has also imposed currency controls, although it announced on Wednesday that some of them would be lifted in the near future. The restriction led the Moscow branch of Italy's UniCredit bank to halt all trading in Belarusian roubles. “UniCredit is not accepting client flows at the moment,” said a statement from the bank.
Belarus has seen its foreign currency reserves dwindle to only $4bn as of March, a $1bn fall in the first two months of this year.
The reasons for the crisis include wage rises and other spending increases introduced before the December 19 presidential elections, a rigged contest that Mr Lukashenko claims he won. The election set off street protests that were harshly suppressed, with many opposition activists arrested.
Belarus is also paying more for the natural gas it imports from Russia and a new agreement has cut into its ability to refine Russian crude and sell it to western Europe – a traditionally important source of hard currency used to subsidise the country's inefficient heavy industries.
Saddled with energy-hungry factories producing goods that are increasingly difficult to sell in Russia, Belarus's trade deficit is growing rapidly, reaching $902m in January compared with $2.7m for the same period a year earlier.
The government had hoped to attract foreign investors but the result has so far proved disappointing.
Earlier this month, Standard & Poor's downgraded its credit rating for Belarus, making borrowing on international markets more costly.
Analysts say Belarus is going to have to devalue its currency, something that the central bank has so far ruled out.
“Belarus has been running a deep current account deficit for years now and the presidential election year of 2010 led to excessive fiscal spending,” said Sanna Kurronen, an analyst at Danske Bank. “The situation seems to be escalating rapidly. We see no reasonable alternative but for a devaluation.”
Part of the government's response is selling off state enterprises, but the likeliest buyers are Russian companies, increasing Belarus's already overwhelming dependence on its large neighbour, with whom it is building an economic union.
Mr Lukashenko's efforts to open his country to the west have been hampered by the stolen election, which prompted the European Union and the US to impose travel bans against senior officials of the regime.
Belarus is also hoping for a $1.7bn loan from a grouping of ex-Soviet states as well as obtaining money to build a nuclear power station. However, a loan is likely to be of only passing help.
“We believe that a loan would only help in the immediate term, given that the current account seems to be remaining deeply in deficit in 2011,” said Mr Kurronen.