Ukraine’s currency devaluation creates new challenges for Belarus’ foreign trade

April 22, 2016 18:46

Ukraine is the second largest market for Belarusian products after Russia. Economic instability in Ukraine and substantial public debt has resulted in a sharp weakening of Ukraine’s currency (hryvnia). The hryvnia’s devaluation will result in falling export proceeds for some Belarusian goods and will create favourable conditions for growing imports from Ukraine.

Ukraine’s hryvnia to the U.S. Dollar exchange rate reached UAH 10.5 per USD 1.

In 2013, Belarus’ exports to Ukraine totalled USD 4.2 billion. The Ukrainian market is the second largest for Belarus after the Russian one. Belarus’ main exports include petroleum products (68% of the total exports to Ukraine), potash and mixed fertilizers, tyres, refrigerators, trucks and tractors.

After the leadership change, Ukraine has reported a significant lack of funds in the budget. Enterprises were forced to reserve funds for 6 days if they were buying foreign currency at the currency exchange to settle foreign trade contracts. UAH/USD exchange rate on the interbank market sometimes exceeded UAH 11 per USD 1 and foreign exchange market reported multiple hryvnia exchange rates. Dividends from foreign currency deposits have been frozen. Until Ukraine receives foreign aid from the IMF or other international donors, the hryvnia might continue to sink.

Problems with converting the hryvnia on the interbank market have led to reduced export of Belarus’ petroleum products to Ukraine and an oversupply of fuel on the Belarusian market. Fuel surplus stock is sold to Russia and the EU. Belarus has used Ukrainian ports to transit her petrochemical goods to Mediterranean countries, however currently such exports carry risks of cargo safety. In addition, exporters of petroleum products may face delays in payments by buyers. The uncertainty with the hryvnia exchange rate will also result in reduced exports of other Belarusian goods. Foodstuff industry might suffer huge losses, because it will lose its competitiveness on the Ukrainian market, while food imports from Ukraine might increase considerably, namely, sunflower oil, waste vegetable oils, and confectionery.

Belarus’ estimated losses in exports may reach 10-15% of total sales in 2014, while imports from Ukraine may increase by 5-10% if Customs Union does not introduce new restrictions.

Belarus will lose a share in the Ukrainian market because of the devalued hryvnia. Only by shifting exports to other countries will she be able to compensate for the losses. Meanwhile, only petroleum products exports allow for minimal financial losses. Exports of other goods will either reduce or incur substantial financial losses due to lower prices.

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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.