Budget 2013: an attempt to fulfill the impossible
Draft 2013 budget is based on inflated figures and the Belarusian economy will be unable to fulfill it without money printing. Departure from the tight monetary policy could provoke yet another loop of problems in the currency market, difficult to solve in the view of the foreign debt payments.
On November 3rd, 2012 the 2013 National Budget Law was published.
The initial parameters for the 2013 Budget forecast are unrealistic. GDP growth is projected at 108.5%. In January-September 2012 GDP growth was 2.5% with a downward trend. Businesses’ debts during the liquidity deficit period have increased significantly, which has suspended the core investment process.
The 2013 forecast for the export of goods and services growth - 115.2% of 2012 - seems unduly optimistic. Record high levels of exports in mid-2012 are unattainable in the near future, which is confirmed by the foreign trade statistics for January-September.
Consolidated budget for 2013 is balanced. Revenues and expenses are projected at BYR 197 trillion, which is 26.8% higher than the projection for 2012. The estimated inflation rate, 12%, implies a substantial increase in revenues will not be due to inflation, but at the expense of the real sector, which should significantly increase labour production in the absence of clear sources of funding for modernization.
As in previous years, substantial funding is envisaged for state agricultural programmes. In 2013, the amount budgeted for agriculture (more than BYR 15.5 trillion from the state budget and BYR 15.5 trillion from loans) will exceed BYR 31 trillion, or about USD 3.5-3.6 billion. Against the background of increased competition in the Russian agricultural market, refund risks are clearly underestimated, given the significance of the funds invested in the development of agricultural enterprises.
Thus, the Belarusian economy is faced with a choice. It will not be able to execute the projected budget without money printing. And the latter may result in a growing imbalance in the economy. The government is trying to focus on qualitative indicators, while the final decision will depend on the supreme authority.
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.