In 2011 Belarus’ foreign debt increased sharply
The country’s economic policies are based on borrowings and sales of state property. If external debt rate continues to grow, the means to attract new loans will reduce along with the value of property put up for privatization.
The only option for recovery is to attract FDI for new businesses and projects however any significant improvement of business climate under the current political and economic conditions is impossible.
Belarus’ foreign debt in 2011 increased by 3.9 times and on 1 January 2012 amounted to Br 111.9 trillion. Domestic debt increased by 3.5 times and reached Br 32.3 trillion. The external public debt - GDP ratio in 2011 increased up to 40.8% from 17.1% on January 1, 2011. The total public debt of Belarus – GDP ratio in 2011 reached 52.5%. The external debt secured by the central government had the highest growth rate in 2011, i.e. it increased by 8.1 times, up to Br 13.4 trillion.
Such a significant increase in external debt in 2011 was due mainly to the devaluation of the Belarusian ruble, and the corresponding decrease of the GDP of the country. Calculated in USD, the external public debt of Belarus in 2011 increased by 1.38 times and reached USD 13.4 billion on January 1, 2012. Regardless of the fact that currently the external public debt ratio is still below the level recommended by the World Bank (50%), the irreversible trend of growth of debt is disturbing and threatening. With the increasingly aging capital stock and technologies, the only way for the authorities to stimulate the economy is to pump it up with emission money and as a result, face with the devaluation, slowed-down GDP growth and a sharp decline in the living standards. Bearing in mind the upcoming parliamentary elections, a sharp reduction of budget expenditures and tightening of the tariff policy for the population are merely feasible. Therefore, the country is doomed to a vicious circle of fallacious economic policy and increasing domestic and external debts. In 2012-2014 the government should repay more than USD 6 billion of debts, which is impossible without major new borrowings. That makes the country’s position vulnerable in the long run.
The country's leadership has instructed the local authorities to raise minimum wages at enterprises by the end of 2019 to BYN 1,000, which would lead to an increase in the average wage in the economy as a whole to BYN 1 500. The pace of wage growth in 2017 is insufficient to ensure payroll at BYN 1000 by late 2017 without manipulating statistical indicators. In order to fulfil the president’s order, the government would have to increase budgetary expenditures on wages in healthcare and education, enterprises – to carry out further layoffs and expand the practice of taking loans to pay wages and restrict investment in modernisation of fixed assets. In 2010, the artificial increase in wages led to a threefold devaluation in 2011, an increase in the average salary to BYN 1500 will not match the capabilities of the economy and would lead to yet another devaluation.