Belarusians Stopped Financing Lukonomy

The population used to be the main provider of finance for the economy.

Now the economy is financed by the rest of the world, while the government and businesses continue over-consuming, Ezhednevnik writes.

The financial flows within the country involve several agents: companies, people, government, banks and the National Bank. However, their roles are not equal: some bring money into the economy, while others consume them. CASE Belarus analysts came to the conclusion that in 2015 the “incoming” stream was generated by the population, who were taking their money to the banks. The National Bank and companies consume more than others. But in 2016 the balance has changed.

At whose expense is the banquet?

The population has stopped being the main source of funding. According to the balance of financial flows for the first quarter, the population has cut down the support of other economic agents by 4.6 times – its contribution was only 6.5 trillion rubles.

Commercial banks sensed that first and foremost, since the population placed 99% of their free funds in bank deposits. As a result, the resource base of banks significantly reduced, limiting their opportunities for lending to the economy.

As a consequence, banks have reduced support to other economic agents by 2 times – their contribution was 24 trillion rubles.

Their main customers – the National Bank, the government and enterprises, suffered from the reduction of financial flows from banks. Consumers had to take abroad 20 trillion rubles, short-received from the public and banks. The support from the rest of the world increased by 17 bln.

However, it was not enough to keep the funding at last year's level. In the first quarter the support of the population, banks and the rest of the world was 24% of GDP, whereas in the past year, the amount was 30% of GDP.

Who consumes the most money?

In the first quarter the government took the fifth part of the common financial “pool.” Never before have the public administration structures taken such a large share of resources – they have been content with an average of 1.3% of the funding for the last few years.

As for enterprises, it was them who seized almost all the money out of the economy before – in the past year they consumed 4/5 of all the resources. In 2016, enterprises have had to restrain appetites and to get only 3/5. As a result, other agents cut down their support of enterprises from 23% of GDP to 14.5% of GDP.

The money goes to pay debts

Analysts say that there have never been pulling funds from the public administration sector and the bodies of monetary regulation to such a large extent. This confirms the findings of individual researchers that the current recession in the Belarusian economy is closely linked with the external debt crisis in the country.

“The bodies of state administration are spending heavily on the external and domestic currency debt repayment and servicing. This narrows the opportunities for investing in the real economy sector and largely determines the investment process depression,” – the researchers concluded.

Why have debts become such a burden for Belarus? Apparently, the previously borrowed funds were invested in projects that did not give proper returns. Therefore, the country has faced the debt crisis.

“The funds invested in 2008-2010 have had to give a return in 2016. But it seems that it is not happening. To pay for The debts are to be paid off in the situation, when export currency revenue not only has not increased, but even decreased,” –the CASE Belarus researchers noted.