Government to decide: devaluation or financial paralysis
On November 22nd, Prime Minister Myasnikovich said that the state housing construction programme was short of BYR 1.8 billion.
A slowdown in lending has affected Belarus’ economy. If restrictions on lending are not lifted in the medium term, economic settlements will be paralyzed. Today the only cheap money source available is printing, but that might result in rapid devaluation.
In October, the economy felt the effects of the credit crunch policy. A positive effect from this decision was the decline in net demand for foreign currency by legal entities in October 2013 - to USD 29.4 million – the lowest in the last three months. However, there were significantly more negative effects. Some companies have used loans to finance current operations and after the credit crunch will be unable to pay wages, which may lead to greater social tensions. Cement plants have reduced production due to the unavailability of bank loans. The construction industry may derail 2013 housing construction plans due to restrictions on concessional lending.
If credit crunch policy is prolonged, payments in the economy will be crippled. Loans were used by counterparties to make payments throughout the cycle. Using loans, customers were paying construction contractors, wages were paid, building materials were bought, electricity, etc. Lack of financial resources leads to arrears and economic slowdown. Ultimately the resources will stop returning to the banking system and entire economy will become paralyzed. Even the slightest panic by depositors may result in some banks having problems with meeting their customer obligations.
Partially, the credit crunch problem is recognized in the government. The latter has elaborated some regulations, envisaging resuming concessional lending in some spheres, such as housing construction. When there is lack of budgetary proceeds, the National Bank has an option to switch on the printing press or the Government might take a decision to privatize state property. Besides sale of MTS shares (Belarus requested USD 800 million), no other major transactions have been projected. Therefore, the only source for concessional lending is money-print. However, it will rapidly increase pressure on the currency, which coupled with the lack of external lending, will accelerate devaluation.
Thus, the government has to choose between attempts to maintain the stability of ruble by slowing down the economy or to lift the credit ban, which will accelerate the onset of devaluation. Since the government has failed to fulfil most 2013 economic development indicators, it has nothing to lose and could be held responsible for the future devaluation.
President Lukashenka continues to rotate staff and rejuvenate heads of departments and universities following new appointments in regional administrations. Apparently, new Information Minister Karliukevich could somewhat relax the state policy towards the independent media and introduce technological solutions for retaining control over Belarus’ information space. New rectors could strengthen the trend for soft Belarusization in the regions and tighten the disciplinary and ideological control over the student movement in the capital.
President Lukashenka has appointed new ministers of culture and information, the new rector of the Belarusian State University and heads of three universities, assistants in the Minsk and Vitebsk regions.
The new Information Minister Karliukevich is likely to avoid controversial initiatives similar to those former Minister Ananich was famous for, however, certainly within his capacities. Nevertheless, the appointment of Belarusian-speaking writer Karliukevich could be regarded as the state’s cautious attempt to relax environment in the media field and ensure the sovereignty of national media.
The Belarusian leadership has consolidated the trend for mild Belarusization by appointing a young historian and a ‘reasonable nationalist’, Duk as the rector at the Kuleshov State University in Mogilev. Meanwhile, while choosing the head of the Belarusian State University, the president apparently had in mind the strengthening of the ideological loyalty among the teaching staff and students at the main university in order to keep the youth movement at bay. Previously, Korol was the rector of the Kupala State University in Grodno, where he held purges among the disloyal teaching staff.
The trend for the renewal of mid-ranking executives and their rejuvenation has confirmed. The age of the Culture Minister and three new rectors varies from 39 to 44 years old.