Devaluation on cards, poor economic model to blame

April 22, 2016 18:40

On November 6th, the National Bank published the latest data on Belarus’ international reserves.

Belarus is rapidly approaching devaluation: in October, international reserves were the lowest since 2011. While selling off assets may keep devaluation at bay, it will not address the root cause, i.e. an inefficient economic model.

As of November 1st, Belarus’ international reserves were USD 6.8131 billion, a decrease since October by USD 574.6 million. In October, public debt repayment in 2013 peaked. Belarus repaid more than USD 260 million to the IMF on the principal loan, as well as other liabilities. The domestic foreign exchange market was a net buyer of foreign currency, which has led to a substantial decrease in gold reserves.

Belarus’ gold reserves were lower than in October 2013 only three times before: in June 2009, December 2010 and January 2011. In 2011, the drop in the international reserves resulted in the Belarusian ruble devaluing by 300%. The current level of international reserves is worth around 1.7 months of imports. In December the demand from individuals and corporations for foreign currency is likely to increase due to Christmas and New Year celebrations. Around the same time, Belarus is anticipating the fourth and the last tranche (USD 440 million) from EurAsEC ACF, but its disbursement might be delayed depending on the situation with the Baumgertner case (CEO of the Russian potash company, Uralkali).

Belarus may avoid devaluation only if it starts selling its assets and spending the proceeds on servicing the public debt and the population’s growing needs. However, only profitable Belarusian assets are of any interest to investors, and if they are sold, Belarus’ budget revenues will drop and the need to devalue BYR will arise once again.

The problem is rooted in Belarus’ economic model which is based on rigid centralized management, consumerist approach to foreign investment, corruption and fear of economic reforms, misappropriation of available funds, bureaucratized decision-making and the lack of real interest from international investors. Belarus is not yet sure if it can count on Russia’s support, and without it Belarus might go bankrupt overnight.

Belarus faces the devaluation of the Belarusian ruble in the near future. The vicious circle might be broken only if Belarus reforms its management structure.

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The Belarusian authorities have launched a discussion on the moratorium or abolition of the death penalty under the pressure of Belarusian human rights activists and international community. Apparently, the authorities are interested in monitoring public sentiments and response to the possible abolition of the capital punishment. The introduction of a moratorium on the death penalty would depend on the dynamics in Belarusian-European relations, efforts of the civil society organisations and Western capitals.

In Grodno last week, the possibility of abolishing the death penalty in Belarus or introducing a moratorium was discussed.

The Belarusian authorities are likely to continue to support the death penalty in Belarus. During his rule, President Lukashenka pardoned only one person, and courts sentenced to death more than 400 people since the early 1990s. Over the past year, Belarusian courts sentenced to death several persons and one person was executed.

There are no recent independent polls about people’s attitude about the death penalty in Belarus. Apparently, this issue is not a priority for the population. In many ways, public opinion about the abolition of the death penalty would depend on the tone of the state-owned media reports.

That said, the Belarusian Orthodox Church and the Roman-Catholic Church stand for the abolition of the capital punishment, however their efforts in this regard only limit to public statements about their stance. Simultaneously, the authorities could have influenced public opinion about the death penalty through a focused media campaign in the state media. As they did, for example, with the nuclear power plant construction in Astravets. Initially unpopular project of the NPP construction was broadly promoted in the state media, and eventually, according to independent pollsters, was accepted by most population.