Welcome to the1990s. Lines by currency exchange offices. It is impossible to withdraw foreign currency. It cannot be bought even for immediate needs, such as visa applications. Black market is the only salvation, where U.S. dollars are sold from under the counter and thus the price is 20-40% higher than ruled by the National Bank...

The Blow

From March Belarus is experiencing the same nightmare through which Ukraine has passed at dawn of its independence. What happened in the country is the monetary crisis. Everything was going for it for the past several years. But, the President of Belarus Alexander Lukashenko and his team are trying to ignore it, therefore causing his state economy an even bigger damage.

The head of the Belarusian central bank, Petr Prokopovich, has had the feeling of problems' rapid growth since the end of last year. Back than the first signs of the future problems appeared. The central bank has been actively attracting dollar loans from commercial financial institutions to cover the need for even greater quantities of imports, but there was chronical short supply of it. Only in January 2011 Belarusian companies have bought foreign currency for $405 million more than they have sold.

Prokopovich is long familiar with this sense of danger. Deficit of the balance of trade is a habitual Belarus phenomenon caused by the low competitiveness of Belarusian products on both external and domestic markets, as well as high demand for imports. In 2010 foreign trade deficit was $7.5 billion, or 14% of GDP (while $4.7 billion was forecasted). However, it was possible to hide the deficit of the currency by foreign direct investment (privatization) and external borrowing. In late 2010 - early 2011 the situation has changed.

The beginning of the end was the desire of the Belarusian president to "buy" the sympathy of the voters. In the second half of 2010, on the threshold of the presidential elections held in December 2010, Alexander Lukashenko has suggested raising social standard of living, and at once, by 30-50% for all state employees. At the same time, the volume of crediting in the country grew by 41% last year alone. Alltogether, this led to the present shopping boom among Belarusians. However, mostly imported goods were bought. As a result, only during January-February imports to Belarus have increased by 60.6%, while exports increased only by 25%.

The second factor was the political repressions. When after the presidential elections, directed by Lukashenko, Belarusian police beat and arrested most of the opposition leaders, the EU was forced to talk with Belarus with ultimatums. "This has made foreign investment and new external borrowing very unlikely," - says Ekaterina Bornukovo, senior researcher of the Belarusian Research Centre BEROC. Delicate balance of investment for the coverage of huge current account deficit has been destroyed.

UkrAgroConsult