Russian rouble devaluation is now main challenge for Belarusian economy

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April 22, 2016 19:01

The sharp Russian rouble devaluation, given the scale of the Russian-Belarusian economic relations is a direct threat to the Belarusian economy. In developing protective and compensatory measures, the Belarusian government apparently intends to use the traditional administrative means. In particular, despite the agreements on free movement of goods within the Customs Union, Belarus may restrict imports of Russian goods to the Belarusian market in order to protect domestic producers.

On November 15th, the RUR/USD exchange rate was RUR 47.39 per USD 1. This means, that since early 2014, the Russian currency depreciated by 45% against US Dollar. The main reasons include, progressive drop in oil prices and destabilsing effect from the sanctions imposed by Western countries over the situation in Ukraine. In addition, Russian rouble is under significant pressure due to the need to repay significant external corporate liabilities and because foreign currency earnings have reduced significantly due to falling oil prices and reduced sales of natural gas on foreign markets. Some large Russian companies have limited access to loans on the debt markets in the EU and the US, as well as to technology, which allows increasing production in the long-term. In the view of the bulk of negative external factors, the Russian rouble will be subject to further pressure from legal entities and individuals.

The Belarusian economy is largely dependent on the processes taking place in the Russian economy. Belarus’ Prime Minister Mikhail Myasnikovich said, that the Russian rouble devaluation was one of the main reasons why domestic goods had lost their competitiveness. For example, in August-October 2014, losses from the Russian rouble devaluation in food industry alone exceeded USD 160 million. Export of engineering products are reducing, so as they are mostly supplied to the Russian market. Fears for the Belarusian rouble amid Russian rouble devaluation have led to an increase in devaluation expectations in Belarus, which resulted in citizens becoming net buyers of foreign currency and rouble deposits growing at a slower pace in the banking system.

In these circumstances, the most reasonable thing would be Belarusian rouble devaluation by circa 20%-25% in order to restore the competitiveness of domestic products, both on the domestic and on the Russian market. However, this solution might cause undesirable social phenomena ahead of the elections in 2015. Therefore, the National Bank – for the sake of "stability" – maintains the gradual depreciation of the national currency policy. In order to help domestic producers on the domestic market, the government may apply administrative restrictions on imports, including ‘non-officially’ on Russian products. On November 11th, President Lukashenko said, “sit down and think about how you are going to protect our own producers. References to that we liabilities in the Customs Union, the Eurasian Union shall not be accepted. Own producers should be protected”.

In order to reduce the production costs, wage growth may be limited at industrial plants and managers’ functions may increase in order to have the room for layoffs.

The government is using mainly administrative means to neutralise the negative impact of the Russian rouble devaluation on the economic processes in Belarus. In the mid-term, such measures may be ineffective, because they might inflict new negative effects, in both, economic and social spheres.

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President ensures continuity of state administration with young middle-level personnel
October 02, 2017 12:08
Image: BRSM.BY

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.

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