Belarus’ authorities unable to cope with economic difficulties

April 22, 2016 19:04

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 On December 20th, the most popular e-commerce portal in Belarus, 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.

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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.