Belarus’ foreign trade: at an all-time low

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April 22, 2016 19:03

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.

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Belarusian and Ukrainian Defence Ministries entangle in confrontation spiral
October 02, 2017 11:57
Фото: RFRM

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.

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