The central bank of Belarus raised its benchmark refinancing rate by a sharp 500 basis points to 25.0 percent to ensure financial and macroeconomic stability by slowing down inflation and adjusted other key rates to help maintain market liquidity.
The National Bank of the Republic of Belarus, which cut its rate by 350 basis points in 2014 and has been deeply affected by the crises in Russia, also said it would intervene in foreign exchange markets with its reserves to smooth out "drastic fluctuations" and abolished the commission on foreign exchange purchases by households to help unify the exchange rate.
Multiple exchange rates have emerged since Belarus imposed a series of capital controls and last week the central bank cut its commission on individuals' currency purchases to 10 percent from 20 percent. The fee was initially set at 30 percent.
In order to maintain liquidity in financial markets, the central bank will cut the rate on its standing facilities and bilateral operations to 40 percent from 50 percent as of Jan. 14 while the rate on overnight deposits would be raised to 20 percent.
In order to reduce the negative impact on banks' liquidity from the fall in the exchange rate of the Belarusian ruble, the central bank will also will cut the reserve requirement on foreign currency deposits to 12.5 percent from 13.0 percent in January and then to 10 percent in February.
"This measure will make it possible to support the stable functioning of banks under the conditions of the lack of ruble funds which appeared in December 2014," the central bank said.
In addition, the central bank also resumed pegging its ruble to its foreign currency basket, with the share of Russia's ruble rising to 40 percent while the share of the euro and U.S. dollar declines to 30 percent, respectively, the bank said.
Belarus, a former Soviet republic, has been deeply affected by the crises in Russia, its largest trading partners.
The central bank has been devaluing the exchange rate of the ruble and set a rate of 13,760 to the dollar as of Jan. 8, a depreciation of 31 percent since the start of 2014 and 40 percent since 2012.
Last month the president of Belarus replaced the prime minister and the chairman of the central bank and other top officials.
The headline inflation rate in Belarus eased to 18.28 percent in November a 2014-high of 20.62 percent in August. The central bank targets inflation of 12 percent in 2015.
The National Bank of the Republic of Belarus issued the following statement: