New government plans tough austerity measures

April 22, 2016 19:04

The National Bank of Belarus has adopted a number of measures as a part of its monetary policy in order to stabilize Belarus’ financial situation. In the first days of January, the new government and the new team of the National Bank have managed to address the problems on the currency exchange market without social discontent growing. However, the measures adopted by the government and the National Bank have led to personal income freezing, or even falling, which goes against the traditional state policy of pumping up household income in the year of the presidential elections, which will have an adverse effect on the authorities’ popularity. In the future, this could lead to a contradiction between the actions and statements of the Executive Office of the President, government, and the National Bank, as well as to officials being increasingly criticised by the president.

President Lukashenko is trying to bring on board professionals who have proven to be relatively successful in managing crises on the currency exchange market within the current socio-economic model. Key staff changes within the government and the National Bank were made over the Christmas holiday period in order to soften the public’s reaction at a time when the population is concerned with the limitations on the currency exchange market. The head of state has not blamed the previous teams of the government and the National Bank for failures in the country’s socio-economic development. However, president Lukashenko has underlined his readiness to use “another reserve of personnel” after the election. 

Meanwhile, in early January the National Bank’s new management has managed to address the problems on the currency exchange market by carrying out another devaluation of the national currency by 26%, although originally there had been plans for a single currency exchange rate by February 1st. It is worth mentioning that the new head of the National Bank, Pavel Kalaur, has some experience in dealing with currency exchange crises, having worked at the National Bank for 17 years. It was precisely when Kalaur was a deputy head of the National Bank that a one-time devaluation of the national currency was held, and earlier, in 2000, he led a team which had a single currency exchange rate as its goal.

At the same time, the year of the presidential elections is usually a year when Belarusians see a significant growth in their personal income. But this time, the Belarusian state cannot guarantee such a growth (which was usually artificially created using domestic resources) without risking yet another currency devaluation. Despite the president’s statements on the need to increase personal income, the current government and the new team at the National Bank are picking up where the previous authorities left off, namely limiting the growth of the wages and sustaining the stability of the exchange rate. Introducing the new head of the National Bank, the president defined his duties: “The most important thing today is the stability of the national currency. We face a strategic task – to strengthen the trust of the population in the national currency – the Belarusian ruble.”

It is worth mentioning that since summer 2014, wage growth in Belarus has been de-facto frozen, and living standards even fell after the national currency was devalued by 30% at the start of this year. 

President Lukashenko continues to view the staffing policy as a basis for sharpening the current socio-economic model’s efficiency. The new head of the President’s Executive Office, Kosinets, underlines growth in performance discipline as the most important of his primary goals in his new office: “Discipline is the mother of victory. If there isn’t discipline, there won’t be a victory. That’s why there should be discipline everywhere. The heart of the problem lies in another thing. There are terms “strictness” and “humaneness”. Alongside strictness, there should also be humaneness.”

Most likely, during the year of the presidential elections, the government’s main objective will be to keep the population’s standards of living at an acceptable level by curbing inflation and price rises. The Belarusian authorities will continue to prop up the currency exchange market without changing the socio-economic model or carrying out structural reforms of the economy. In addition, official Minsk will step up the search for foreign borrowing which might provide a certain growth of personal income – but minus the risk of yet another devaluation.

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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.