Pyramid scheme game

Belarusians to face a hard time.

How can the government's decision to “tackle” the currency crisis at the end of the year be evaluated after some time? Was it successful? What other goals were pursued? Were they achieved? Why wasn't a normal 30% devaluation carried out? Why did the government opt to confuse people?

Radio Svaboda discussed the questions with economist Leanid Zlotnikau and director of the Research Centre at the Institute of Business and Management Aliaksandr Chubryk.

“Firstly, the authorities hurried to stop panic about foreign currency. Secondly, the complicated scheme was invented not to say the word 'devaluation'. Lukashenka promised that no devaluation would happen,” Leanid Zlotnikau thinks.

“I think there were no easy ways. A 30% devaluation would not have stopped panic on the currency market. So, the authorities in fact paralysed the currency market,” Aliaksandr Chubryk thinks.

Nevertheless, the strategic problems of the Belarusian economy were not solved. Will people notice the actual devaluation?

“Those who were monitoring the situation on the currency market have noticed that a devaluation was carried out under a different title,” Zlotnikau said.

“It cannot be hidden, whatever it is called,” Chubryk says.

Asked about economic, social and political consequences of the government's recent decisions, Leanid Zlotnikau answered:

“We have had the actual 30% devaluation, but it is not enough. Russia had a 50% devaluation. There are also internal reasons for to devalue the national currency. Real salaries have increased by 36% for the last 2.5 years, but GDP has grown only 1-2%. We consume more than we produce. So, the devaluation will continue.”

Chubryk thinks that economic consequences of the government's decisions are negative for all economic agents.

“Exporters suffer losses, because they have to buy foreign currency on the currency exchange at a higher price and sell it at a lower price. Importers have to pay 30% more to buy foreign currency, but they are not allowed to raise prices on the domestic market.

Another more important economic problem is that big Belarusian state-owned plants lost a significant share in the Russian market. It will cause layoffs and freezing salaries in Belarusian rubles on the current level,” the economist thinks.

According to Leanid Zlotnikau, “raising interest rates on ruble-denominated deposits to 50% is a temporary measure for 1-1.5 months.”

“This is a pyramid scheme game. I agree that our problems lie in the real sector rather than in the monetary policy. We will face a hard time,” the expert is confident.