Default Jeopardises Belarus

Reforms are the only resolution for the country.

In his interview to thinktanks.by expert on reforms in public sector and leader of Kosht Urada project within BIPART project Uladzimir Kavalkin stresses that given the crisis situation and today's possibilities and resources of the Belarusian state structural reforms are the only way out of a prolonged drop in the economy.

Second, a reform is required and, as a consequence, the change of the monetary policy: "Loans should be available to business so that it could invest, develop or expand the range of services and increase their quality, in fact, business should develop".

"Structural reforms are required to provide our business with legal protection, protection of private property and to ensure equality between different branches, between public and private business," Uladzimir Kavalkin notes. - If reforms are not taken, it will be impossible to recover. And even if taxes reach their minimum, it will not affect investments as much as it is needed to have influence on structural changes."

In addition, the expert believes the time has come to abandon methods of economic management, which are practiced by the so-called "good economic persons".

"Their time, speaking frankly, expired 25 years ago. But the current situation in the Belarusian economy has occurred due to reallocation of funds between effective commercial companies and the loss-making public sector. It there was no public support to state-owned enterprises, they would have drowned long ago. And all these "good economic persons" would have lost the competition in the market," Uladzimir Kavalkin said.

In general, the expert calls the current situation in the economy a "walking on a light ice, which can crack at any moment and we will drown."

"I mean the current situation with debts — we have a huge debt burden, huge payments on the foreign debt. And any problem with the payment of the public debt may mean default to our country with corresponding consequences", Uladzimir Kavalkin explains.

"By the way, in this situation the default is not the worst thing. It is even worse when Belarusian citizens will pay these debts through taxes. The default could write off at least some part of these debts like "bad ones". While the default could make an external debt innovation possible. That is the default allows "resetting" the situation where it is possible. It can't go on this way: debts are being accumulated; every production cycle does not bring any profit - the more we produce, the more we drown. It does not make any sense, it should be stopped," the expert believes.

The Belarusian budget misses money to pay the external debt and its interest:

"There is only one way out - to refinance, and do it with the help of the International Monetary Fund, EEC structures, and credits of Russia. Any foreign policy challenge, any foreign policy disputes which can affect the refinancing lead to the default."