Belarusian rouble depreciation has not heated tension in Belarusian society
The Belarusian government is hoping to support exports in order to preserve its social function, i.e. ensure high employment rate. In turn, the population stands ready to waive its demand on wage-growth in exchange for stable employment. Smooth devaluation of the Belarusian rouble is unlikely to raise tension in society and lead to open discontent in the form of protests.
Since early 2016, the Belarusian rouble devalued by 16.1%. The Belarusian rouble has already depreciated by more than the government forecast for late 2016 (BYR 18600 per 1 USD).
The Belarusian rouble exchange rate has fluctuated considerably, but the National Bank has not resorted to administrative measures to regulate the foreign exchange market. In addition, the National Bank intends to prevent the strengthening of the national currency, due to the need to support state-owned enterprises-exporters. If foreign currency supply exceeds the demand, the National Bank will be ready to restrain the strengthening of the rouble by buying foreign currency in order to preserve Belarusian exporters’ competitiveness.
The depreciation of the Belarusian rouble months following the 2015 election campaign has not led to growth of tension in society. Since the last presidential elections in October 2015, the Belarusian rouble devalued by 22.5% (BYR 17202 per USD 1 on October 11th, 2015, and BYR 21 095 per USD1 on January 23rd, 2016), while the average salary in Belarus fell by more than USD 200 throughout the year (USD 619 in December 2014 and USD 412 in December 2015). Meanwhile, in 2011, a sharp deterioration in the living standards due to the deep financial crisis and a subsequent recession, has led to numerous street protests not only in Minsk, but also in other Belarusian regions.
President Lukashenka has avoided public assessments of the currency market situation and criticism of the government and the National Bank. However, he, de facto, approved measures undertaken by financial and economic authorities with reference to an informal contract with the population, which envisages ensuring minimum stability in exchange for lowered living standards requirements. “And as the time goes by, these claims will be gone, simply forgotten, and the people, as it always happens, will forgive the authorities”, he said.
The Belarusian authorities have convinced the population that the devaluation of the national currency is inevitable due to Belarus’ limited monetary and economic independence from the Russian economy and the Russian rouble.
In addition, the government is aiming to stimulate economic growth by the weakening the national currency. In 2016, the government intends to provide support to state-owned enterprises in enhancing competitiveness of their export products, as well as to restrain imports with devaluation of the rouble. The state has limited tools to provide support for state-owned enterprises so as it is negotiating a new loan programme with international financial institutions. Moreover, the state anticipates that large state-owned enterprises will help maintaining a high employment rate, one of the key elements in Lukashenka’s socio-economic model.
Simultaneously, the authorities pay special attention to maintaining social and economic stability in the capital, where they direct most resources to buy the loyalty of the electorate. Amid deprecation of the national currency, the difference in wages of workers in the regions and the capital, as well as in various economic sectors is significant. For example, in December 2015, the average salary was almost BYR 10.5 million in Minsk and only BYR 6.2 million in the Mogilev region.
Overall, gradual devaluation of the national currency is unlikely to cause tension in society and growth of protest moods if the state ensures high employment and timely salaries and pensions.
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.