How severe financial crisis in Belarus would be?

Problems in the economy of Belarus started long before global financial crisis combusted.

It has been written by the former Economic Ties Minister, Doctor of Science in Economics, the head of the association “European Dimension”, a former political prisoner Mikhail Marynich. The full text of his article follows:

It is widely known that the today’s crisis has mostly affected the countries which have a great current account deficit and which are greatly dependent on external financing. And out of them, countries where Western European banks had actively developed mortgage lending are affected to a greater extent. In Eastern Europe these are primarily Latvia, Bulgaria and Romania.

Despite of the fact that the financial system of Belarus is a part of the global financial system relatively marginally, and Belarusian banks are less dependable on external crediting, the financial crisis is to cause hard consequences for Belarus on several reasons.

Firstly, Belarus had a huge adverse balance in foreign trade. It has reached 5 billion dollars for today. It can only be guessed what’s coming next. One thing is obvious; the conditions of trade are to deteriorate, as our major trade partners are to have fewer possibilities to pay for Belarusian goods, which are mostly not of a superior quality after all. It’s hard to say what the future of most Belarusian exporters would be after the crisis, when even such a giant as Belaruskalij has to reconsider its export targets.

The crisis which started as a financial one, has turned into an economic one, and primarily the real sector of economy is to sustain great damage from it, especially in Belarus.

Secondly. As is known, since 2009 energy resources are to become more expensive for Belarus. Prices for goods are to grow consequently.

Thirdly. Even before the crisis access to finances was difficult for Belarusian economic entities, because of their high costs. And today the costs of credit resources have increased even more. It is unlikely to decrease in the near future.

The loan of 2 billion promised by Russia to us, involves political and economic conditions. It is hard to say yet what compromises Belarus would have to make to receive the second tranche, and wide public is unlikely to get informed about that.

The credit of the International Monetary Fund (dreamt about by Belarus) can be granted, but only under conditions of fulfillment of a number of prerequisites of Belarusian economy reforming. And stages of crediting are to be attached by tranches (not by the whole sum of 2 billion) to fulfillment of these conditions by Belarus.

Fourthly. Today the country needs finances. In November taken alone the population bought more than 300 million US dollars, though recently it was a supplier of currency resources. The National Bank has had to spent a considerable part of existing currency reserves (the reserve was 4 billion dollars at its peak) for supporting the exchange rate of the ruble, and worse times are yet to some.

It is clear devaluation is needed. The question is, whether the National Bank would have enough currency for making drop in the ruble exchange rate more or less gradual, or we are to experience a new default.

Fifthly. There was no direct investment into the Belarusian economy, and none of it is expected either. In the conditions of the crisis investors prefer not to risk at all, and if they invest something, it is done in purchase of holdings which have gone down in value. The rating of investment capacities of our country remains rather low, despite of cheerful statements of our government.

It should be said in general that problems in the economy of Belarus started long before global financial crisis combusted. They are primarily caused by the fact that the Belarusian economy was and remains an economy of command-and-control (Soviet) type. That is why in order to overcome crisis phenomena Belarus has to make double efforts: aimed at minimization of global crisis’ consequences and aimed at reforming the economic system. It is obvious that the former is impossible without the latter.