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.
Over the past year, military-political relations between Minsk and Kyiv have become complicated. Due to their high inertia and peculiarities, this downward trend would be extremely difficult to overcome.
The root cause of the crisis is the absence of a common political agenda in the Belarusian-Ukrainian relations. Minsk is looking for a market for Belarusian exports in Ukraine and offers its services as a negotiation platform for the settlement of the Russo-Ukrainian war, thereby hoping to avoid political issues in the dialogue with Kiev. Meanwhile, Ukraine is hoping for political support from Minsk in the confrontation with Moscow. In addition, Ukraine’s integration with NATO presupposes her common position with the Alliance in relation to Belarus. The NATO leadership regards the Belarusian Armed Forces as an integral part of the Russian military machine in the western strategic front (the Baltic states and Poland). In addition, the ongoing military reform in Ukraine envisages a reduction in the number of generals and the domestic political struggle makes some Ukrainian top military leaders targets in politically motivated attacks.
Hence, the criticism of Belarus coming from Ukrainian military leadership is dictated primarily by internal and external political considerations, as well as by the need to protect the interests of generals, and only then by facts.
For instance, initially, the Ukrainian military leadership made statements about 100,000 Russian servicemen allegedly taking part in the Russo-Belarusian military drill West-2017. Then the exercises were labelled quazi-open and military observers from Ukraine refused to provide their assessment, which caused a negative reaction in Minsk. Further, without citing specific facts, it was stated that Russia was building up its military presence in Belarus.
Apparently, the Belarusian and Ukrainian Defence Ministries have entangled in a confrontational spiral (on the level of rhetoric). Moreover, only a small part of the overly hidden process has been disclosed. That said, third states are very likely to take advantage of the situation (or have already done so). This is not only about Russia.
The Belarusian Defence Ministry officials are restrained in assessing their Ukrainian counterparts. However, such a restraint is not enough. Current military-political relations between Belarus and Ukraine are unlikely to stabilise without the intervention of both presidents.