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.
Last week, Belarusian Foreign Minister Makei participated in the foreign ministers’ meeting of the Eastern Partnership and Visegrad Group initiative hosted by Warsaw. The Belarusian FM emphasized Belarus' interest in cooperation in the transport sector, which could be due to Belarus’ desire to export electricity surplus after Belarus finished construction of the nuclear power plant in Ostrovets. Minsk expressed concerns about Warsaw’s stance on the Belarusian NPP, as it refused to buy electricity from Belarus and supported Vilnius’ protest on this issue. Following accusations by the Belarusian leadership and the state media against western states, including Poland, of training "nationalist militants", Minsk did not agree on the visit of the European Parliament deputies from Lithuania and Germany to Belarus and to the NPP construction site near Ostrovets in particular. In addition, the Belarusian authorities have stepped up efforts to enforce education in Russian in Polish-language schools in Grodno and Vaukavysk. Should a rift in Belarusian-Polish relations persist, the Belarusian authorities are likely to step up the pressure on the Polish-speaking minority in Belarus.