Belarusian government talks about reforms to secure investment
‘The government of bankers’, headed by Prime Minister Kobyakov succeeded in stabilising monetary and financial markets. In Q1 2015, Belarus’ real economy was in recession, however, the situation has been normalised by introducing higher tax burden on profitable economic sectors and reducing lending and expenditure on government programmes. The government plans to keep the economic situation under control by delaying loan payments to Russia, hoping to obtain a new loan from the IMF and by introducing ad hoc administrative measures without reforming the existing socio-economic model.
Prime Minister Kobyakov said that the new composition of the Belarusian government had already done a lot to normalise the domestic consumer market situation and would do even more.
In power since late 2014, Kobyakov’s Government consists mainly of bankers unlike preceding Myasnikovich-led government of ‘strong economic managers’. In 2013, the Myasnikovich’s government was responsible for implementing a large-scale economic modernisation, which was a failure leading to financial crisis of 2014-2015. The president has tasked the new government with normalising and ‘not deteriorating’ the economic situation.
Some experts anticipated that the new government would embark on economic reforms. However, so far, the Belarusian authorities have implemented contradicting measures in order to ensure economic stability. For instance, the National Bank and the government alike have made statements about the need to liberalise the economy and business environment, as well as restrict lending and spending on state programmes in order to normalise monetary and financial markets. Despite the fact that in Q1 2015 GDP went down by 2%, the prime minister underscored, that “implemented systemic measures create overall favourable grounds for better performance by enterprises”.
Simultaneously, the government is attempting to preserve control over prices with some ad hoc price regulations, and has introduced additional fees and taxes on profitable economic sectors and fines on those officially unemployed (the new law on ‘social parasites’). In addition, the authorities have attempted to gain additional revenues from IT business, which might have long-term negative effects on the IT industry as a whole and generally contradict the declared intentions to reform the economy. Until now, the IT industry was one of the most growth-promising sectors in the Belarusian economy, should a decision to reform the socio-economic model was made.
Nevertheless, while negotiating with international lenders, the prime minister said Belarus was ready to implement structural economic reforms. At a meeting with World Bank Director for Ukraine, Belarus and Moldova Qimiao Phanom, Prime Minister Kobyakov said that Belarus hoped for a proactive stance and support from the World Bank in negotiations with the International Monetary Fund over a roadmap for economic reforms on April 17th – 18th in Washington. “We welcome a balanced and tailored approach to the analysis of the economic situation in our country and we are grateful to the World Bank for assistance in developing the roadmap for structural reforms”, he said. Indeed, economy specialists say that the roadmap developed by the government envisages structural reforms and revision of Belarusian economic model. The authorities hope to receive the first tranche from the IMF already in 2015; however, the implementation of the core measures of the economic transformation plan would begin only after the presidential campaign in 2016 – 2020.
In addition, the Kremlin has indirectly agreed to support the incumbent Belarusian president in the upcoming presidential elections. The prime minister said that Russia had agreed to refinance Belarus’ debt payments in 2015: “We have reached the agreement with the Russian partners to refinance payments due to the Russian Federation this year in full, including debts on intergovernmental loans and to the ACF”.
However, Kobyakov’s government is unlikely to implement structural economic reforms envisaged by the ‘roadmap’ in full. Despite its ‘reformist’ rhetoric vis-à-vis international creditors, the government’s initiatives as regards economic reforms are highly controversial and do not fall outside existing socio-economic model.
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.