Belarus’ authorities unable to cope with economic difficulties
Preoccupied with maintaining social ’’stability’’ ahead of the 2015 elections. the Belarusian authorities failed to adequately respond to the unfolding economic crisis in Russia and ensuant rouble crash. The government’s urgent administrative measures to curb inflation and devaluation - introducing 30% ’’commission’’ on foreign currency purchases, tightening price regulation in the retail trade, and restricting information flow - will have the opposite effect. Most likely, these measures will trigger the Belarusian rouble’s depreciation and create a commodity shortage in the run-up to the Christmas holiday season. Inconsistent and ineffective decisions have only set off panic among Belarusians, indicating that the ruling authorities are unable to foresee and prevent economic problems.
Economists say that Belarusian businesses exporting to the Russian market have suffered heavy losses amid the economic slowdown in Russia, and that this factor alone required the Belarusian rouble to substantially devalue. Belarus- authorities hoped to delay devaluation at least until early 2015, despite all economic agents increasing their demand for foreign currency in October-November. The Russian rouble collapsed on December 15th v 16th, the Belarusian financial authorities, however, failed to rapidly react. ’’We are not going to rush after Russia, that is absolutely out of the question, because nothing is clear about the Russian market v who wants what or what will be...’’, - said President Lukashenko on December 18th while talking about the possible devaluation. ’’We will adhere to stability in the country and will use all the levers for this, without violating any financial and economic laws that are objective,’’ he underscored.
While the authorities sat on their hands from December 16th to 18th, the population alone bought circa 180 million US Dollars, leaving the banks with no cash. On December 19th, the authorities introduced the first ’stabilising’ measures - a 30% tax on currency purchases for households and businesses (except importers of energy resources and energy-related areas) and an increase in the mandatory sale of foreign exchange earnings up to 50%.
The authorities- decision was meant to be a ’compromise’, as it did not imply depreciation of the national currency, and foreign currency gained value by one-third due to the ’compulsory’ commission. However, bearing in mind the ’’objective financial and economic laws’’, the government’s measures instantly paralysed the work of exchange offices, and led to a sharp drop in transactions on the stock exchange and the emergence of an illegal foreign exchange market.
Another measure designed to prevent price hikes due to the de facto national currency devaluation, was a moratorium on price increases announced by the Trade Ministry and the threat of closure for those who would not comply. Due to uncertain financial perspectives, some retail chains were happy to suspend their sales. The ministry, therefore, warned them against unauthorised closures. As of December 22nd, the Ministry of Trade, Ministry of Health, Ministry of Agriculture and the State Committee for Standardisation intend to enhance control on how regulations prohibiting price hikes on the domestic market are implemented, as well as price quotes in foreign currency. Most likely, in the given circumstances, some retailers would be closed down on various pretexts and others will continue to work without commodities.
In addition, the authorities have started to regulate the information space more tightly. On December 19th, the Information Ministry held an emergency meeting with editors of leading state and independent media in order to warn against ’non-cautious information policy’ in order to ’prevent panic’. On the same day, without any official explanations the following websites were blocked in Belarus:www.belaruspartisan.org, www.charter97.org, www.naviny.by, www.gazetaby.com. On December 20th, the most popular e-commerce portal in Belarus, www.onliner.by was excluded from the national domain zone due to violations identified by the Trade Ministry, ’’of the trade legislation, including regulations on Internet sales of goods (works, services)’’.
Interestingly, in 2011, during the most acute phase of the financial crisis in Belarus, independent media reported a surge in their audiences. The current restrictive measures will restrict peoples’ access to independent websites, however, they are unlikely to change their behaviour v Belarusian citizens will attempt to protect their incomes/savings from devaluation by converting roubles into hard currency or purchasing durable goods. The adverse effect will be achieved v people’s suspicions that the authorities are trying to hide objective information will most likely be strengthened and panic on the currency market will be spurred.
The government’s measures may help to hide some of the crisis’ symptoms v such as queues outside exchange offices, which have temporarily disappeared due to the low gain of currencies - but they do not address the core problem. Current ’stabilisation measures’ would not only fail to prevent the Belarusian rouble’s devaluation, but may accelerate its pace in the near future. De facto appreciation of imports and services nominated in foreign currency (e.g. travel services) will devalue the Belarusian rouble and will have an additional speculative impact on economic agents’ behaviour. Amid the pre-holiday atmosphere, the crisis is even more marked as this is when consumer purchases traditionally peak v and so the currency panic may be followed by a trade deficit.
Ill-conceived anti-crisis measures by the Belarusian authorities may have political consequences, as they introduce the factor of uncertainty ahead of next year-s elections. The guaranteed re-election of Alexander Lukashenko in 2015 no longer looks quite so certain.
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.