How to survive until 2015: major quest for the Government
On May 29th, 2013, it was announced that the Eurasian Economic Union will be launched on January 1st, 2015.
Belarus’ current economic policy requires constant financial support from the outside. The EEU launch envisages lifting of exceptions and restrictions in mutual trade between Belarus, Russia and Kazakhstan. Belarus hopes to acquire additional financing for the current economic model and additional revenues when the obligation to transfer fees in the Russian budget is lifted.
Currently Belarusian economy is in the pre-crisis state. Belarus’ foreign trade in goods in January – April 2013 was minus USD 1 billion. Stocks, despite all efforts to unload warehouses, continued to grow. Enterprises’ financial conditions are poor, net income in the economy in Q1 2013 fell by 35% compared with Q1 2012. External markets are shrinking; Russia’s WTO accession has resulted in dropped exports of major goods. Attempts to maintain certain income levels, regardless of the current economic situation, have created greater imbalance in the economy. Current economic policies in Belarus require external funding to keep going.
The government makes it clear that the main impetus for further integration process would be the following injection of economic aid from Russia. The agreement on redistribution of duties within the Customs Union brought Belarus over USD 250 million in annual payments surplus. Belarus’ savings on the natural gas costs are at least USD 3 billion per year. Crude oil imports and petroleum products for domestic consumption are not charged with additional fees. However, even these significant preferences do not cover the needs, therefore the current account is negative and additional external borrowing is needed. To replenish the budget, the government would like to stop paying duties on petroleum products to the Russian budget.
In 2012, Belarus has transferred USD 3 846.8 million in export duties on oil products to the Russian budget, and in January – April 2013 - more than USD 1 300 million. These sums would cover the needs to stabilize the economic situation and to preserve the current economic model. So far, it was Belarusian Prime Minister who announced Russia’s lifting of fees on oil and oil products trade in 2015. So far, Russia provided no comments. Russia’s economic situation is far from good, Russian budget clearly depends on energy resources’ prices and their current level implies that it may be difficult for Russia to agree on huge amounts of assistance to Belarus. Events of early 2011 and increased prices on Russian oil, under various pretexts, to USD 45 per ton, irrelevant of previous agreements, imply that Belarus is sometimes overly optimistic in terms of aid that Russia is ready to ‘compensate’ for participation in the integration project.
Thus, the government will try its best to prevent the development of the economic crisis by 2015. Belarus will take more loans, on both external and domestic markets and potentially will sell a small number of companies by 2015. The government does not count on purely own resources when thinking about country’s further development.