21 February 2019, Thursday, 16:07
Appeal of the BPR Rada

Shura, File Them, They Are Made Of Gold


The economy may face problems the gold and forex reserves (GFR) can't cope with.

Last week it became known that GFR of Belarus reduced by $108.2 million in June. It turns out that within first six months GFR dropped by $483.9 million. It's a fancy sum, isn't?

Witihn six months people sold $1 billion. The government has a chance to ramp up reserves and to bridge gaps. High prices for oil make people spend their savings.

But amid these favorable conditions the authorities manipulate the GFR, as budget money is not enough. It turns out that it's not as good as officials say.

What did cause cuts in the GFR? What external and internal factors can cause the collapse of the Belarusian economy? Is it possible to avoid them?

Charter97.org asked economist Barys Zhaliba and former head of the National Bank of Belarus Stanislau Bahdankevich and first deputy head of independent Belarus Stanislau Shushkevich about it.

Debt Regime

Economists relate the drop in the GFR with high interest of Belarus on debt repayment:

- Fancy sums were repayed in January. Belarus failed with a timely big tranches of the Eurasian Fund For Stabilization and Development. There were two tranches of $200 million each. It influenced the GFR. We had to approach the critical point of $6.5 billion that is specified by the government, Barys Zhaliba says.

Stanislau Bahdankevich draws attention to the fact that if Minsk had managed to receive the credit of the IMF, there would have not been a necessity to turn to gold and forex reserves:

- We repay both to the East and to the West. Belarus had hope for a credit of the IMF. It would afford to refinance debts and repay some of them. But negotiations were broken. Now one in the West wants to lend us. There are reasons for it. International organizations want systemic reforms, but the Belarusian autorities are not ready for them.

"Hello" from Prakapovich?

There is one more factor which may negatively affect the Belarusian economy - an attempt of the authorities to drag in an average salary. Lukashenka's mantra "$500-salary" has been on repeat for ten years already. Stanislau Bahdankevich assures that it may cause fluctuaions of the national currency and hit the GFR.

- Unfortunately, the growth of salaries does not meet the work efficiency. It jeopardises the national currency. If the authorities admit such an artificial salary growth, especially in a public sector, it may shock the economy.

Former head of the National Bank of Belarus believes that the core of the problem is that the authorities decided to paint the front instead of holding overhaul works.

- Seeing systemic problems in the economy, the authorities are subject to some concessions and exemptions. The opposition deserves some credit for it. It is noteworthy that these exemptions are forced.

no one is involved in reforming state-owned enterprises, which are the greatest problem here. Still no privatization of these enterprises can be held, but only to abolish the command and administration system. Large enterprises are preserved, but the management is not reformed. It bears great expenses.

Stanislau Bahdankevich notes there a lot of expenditures that can be cut and it may contribute to the growth of salaries:

- They include all parades peaceful Belarus does not need, the construction of palaces and carrying out of events for Lukashenka's Administration. It's a poor management. Belarusians are sliding into poverty. They have no hard cash.

Barys Zhaliba offers us to draw attention to the fact that the artificial growth of salaries bears a threat of a "turned-on printing press".

- We observe the authorities following the wretched policy. It's not typical for civilized countries. Let business and the private sector feel free, and it will contribute to the salary growth.

As for the artificial salary growth, it bears direct risks. We could witness the policy the authorities accepted in 2011, as well as consequences it bore.

The sword of Damocles of the oil market

Economists stress that the East can cause true problems for the Belarusian economy. Moscow wants to adopt "the tax maneuver" and to zero Minsk's income made on crude oil duty. Barys Zhaliba believes that it may cause a huge gap in the GFR:

- Russia is getting ready to adopt the tax maneuver; it's an extremely important external factor which can directly affect the economy of Belarus.

The thing is that the zeroing of the crude oil duty results in world prices for oil for Belarus. After all, crude oil makes a great contribution to our financial system. . Three months of ensured exports are the adopted GFR safety level. We have only two months.

External factors are of great importance; our economy depends on them.

In addition, surplus of currency is falling in the domestic market. Last year the population and enterprises sold more than a billion dollars, this year this sum equals to 400 million dollars.

Former head of the National Bank tells about inflation and devaluation risks the oil industry of Belarus may bear:

- There are risks of growth of inflation and depreciation of the national currency. It relates to the situation in the oil market. The "tax maneuver" can cause shortage in oil supply by our refineries. It will initiate real problems.

It the government is still, risks will be fatal.

It could have been otherwise

As we can see, the Belarusian economy is really vulnerable to external problems. The "Russian vector" seems to be the most alarming. Dairy, gas, oil and other trade wars were the factors which repeatedly paralyzed the country.

The first head of independent Belarus Stanislau Shushkevich stresses that the country could have followed a completely different path. A complete dependence of Belarus from Russia is the merit of Lukashenka:

- In early 90s we took a completely different path. We were thinking about diversification of the economy. Because of his Kremlin-aimed ambitions, Lukashenka was ready to surrender everyone and everything.

And that's why all our positions were lost. The Kremlin managed to dictate its terms. All trump cards are in hands of Moscow. Putin can easily put Lukashenka on heels.

Inability of Lukashenka to distance from Russia will affect ordinary Belarusians. We had a fancy public debt. The authorities keep borrowing. And future generations will have to repay.

People who come in power after Lukashenka will have to deal with the deal of the 90s - to restore our independence. Because Lukashenka was ready for every humiliation to stay in power, the interlocutor of Charter97.org summed up.

Shura, File Them, They Are Made Of Gold

Readers of Charter97.org also responded to the news about the reduction of gold reserves and offered their methods of replenishment:

"It's been like that for more than twenty years - borrow me money, and borrow me once again, I have to repay..."

"Ilf and Petrov wrote: "Shura, file them, they are made of gold." If every time the authorities face challenges they turn to gold reserves, it means that things are not as good as it seems"

"I would offer to explore Drazdy with a metal detector. The only noble thing there is noble metals."

"I remember "Wedding in the Malinovka": Hetman lacks gold reserves and guys start escaping," readers of Charter97.org say.