Belarus’ foreign trade: at an all-time low
In October 2014, Belarus’ foreign trade deficit exceeded USD 500 million. Foreign trade has deteriorated. This is mainly due to the the National Bank’s exchange rate policy, as well as the devalued Russian rouble. If the exchange rate policy is retained, international trade deficit may reach USD 3.5 billion by the year-end. To normalise the export situation, the authorities may be tempted introduce a one-off devaluation of the Belarusian rouble.
In October 2014, foreign trade deficit was at its lowest for 2014 . For the second month in a row, Belarusian exports were below the USD 3 billion threshold. At the same time, imports have reached USD 3.5 billion, with crude oil topping the list of imported goods. In addition, crude oil prices have declined significantly in recent months. In October, costs of oil imports decreased by USD 45 million compared with September.
The foreign trade situation has deteriorated mainly due to the National Bank’s exchange rate policy. Amid gradual devaluation of the Belarusian rouble against the US Dollar, devaluation of the Russian rouble means that exports to Russia have fallen, while imports from Russia are on the rise. For instance, private persons took advantage of the fall in dollar prices on cars in Russia and significantly increased car imports. Import of foodstuffs has grown too. That said, due to higher prices, Belarusian foodstuffs are no longer competitive on the Russian market. In addition, a seasonal factor has increased the pressure on foreign trade – imports of natural gas and pharmaceuticals have grown as the weather gets colder.
In the given circumstances, there are two options. The first is to devalue the Belarusian rouble by lowering incomes. This option implies rapidly cutting cross-subsidies, lay-offs at enterprises, and decreasing wages in the economy. In this scenario, the Belarusian rouble could be devalued more rapidly than currently planned. The second option is to have a one-off devaluation of the rouble by 40-50% in order to normalise the situation with exports. This scenario would not solve the foreign currency debt problem at enterprises but would rapidly reduce people’s incomes, unload stocks, and increase exports.
If the exchange rate policy remains unchanged, with no adjustments to employment or wages, the situation with exports will deteriorate and will require the national currency to be substantially devalued - unless Belarus receives external financial aid. A large loan could freeze the situation for some time, but would not solve the problem. The first option is preferable, but it is difficult to implement. The authorities may even decide to hold a one-off devaluation in the election year and blame the population for it – for example, for swelling demand for foreign currency by converting their rouble savings into hard currency.
The National Bank’s exchange rate policy has led to an increase in foreign trade imbalances. The authorities may decide to devalue the national currency and pin the blame for everything on external factors as well as the population who decided to protect their savings by buying foreign currency.
The Belarusian authorities regard the Catholic conference as yet another international event to promote Minsk as a global negotiating platform. Minsk’s proposal to organise a meeting between the Roman-Catholic Church and the Russian Orthodox Church is rather an image-making undertaking than a serious intention. However, the authorities could somewhat extend the opportunities for the Roman-Catholic Church in Belarus due to developing contacts with the Catholic world.
Minsk is attempting to lay out a mosaic from various international religious, political and sportive events to shape a positive image of Belarus for promoting the Helsinki 2.0 idea.
Belarus’ invitation to the head of the Holy See for a meeting with the Patriarch of the Russian Orthodox Church should be regarded as a continuation of her foreign policy efforts in shaping Minsk’s peacekeeping image and enhancing Belarus’ international weight. The Belarusian authorities are aware that their initiative is unlikely to find supporters among the leadership of the Russian Orthodox Church in Moscow. In Russia, isolationist sentiments prevail.
In addition, for domestic audiences, the authorities make up for the lack of tangible economic growth with demonstrations of growth in Minsk’s authority at international level through providing a platform for religious, sportive and other dialogues.