Belarus has a financial pyramid, not an economy.
The Belarusian treasury is suffering hardships. The revenue part of the national budget has lost Br1.8 billion for six months of this year. Is it a big loss for the treasury? Doctor of Economics, Professor Barys Zheliba commented for Charter97.org on the situation with the Belarusian budget.
- Of course, it's a big loss. The economic situation in the country is to blame.
What does replenish the budget? The first is the value-added tax. Our GDP has decreased by 9.7% in six months. Excise taxes usually come second, but this is a separate issue. As you know, we have excise taxes on alcohol, tobacco and gasoline.
Perhaps, there are losses on gasoline, because our refineries were "starving" for two months. Oil wasn't enough.
There are huge losses in foreign economic activity. Customs duties, both export and import, also go to the budget. Statistics show that exports have dropped by 20% since early year; the same happened to imports.
Given the coronacrisis, we failed to raise 1.8 billion rubles. Our budget turned out to be a deficit and the government seeks ways to overcome it.
Savings made in previous years will be used for this purpose. However, they used to be wasted on refinancing our government debts. The Ministry of Finance should think of how to refinance both external and internal debt this year and next year.
- Are the populist measures taken by the state in this election campaign adequate?
- Under current conditions, it is unnatural to raise public sector salaries and pensions. However, as they say, the governments use every mean at the elections.
Such actions may cause the aggravation of the budgetary gap. Income shortfalls will also rise amid unplanned expenditure growth. The authorities will look for ways to compensate for the growing deficit.
Naturally, the main source will be external borrowing, which is already done by placing bonds on the euro market. Borrowings of this type will continue.
The Ministry of Finance will also place its bonds inside the country, which are bought by banks and the population. Once again, government debt will grow.
- Is there an opportunity to refinance the debt today, if all the budget money has patched up the holes?
- The experience of placing two bond issues on the Euro market shows, it's not a problem to find a buyer. These are foreign banks. However, these two loans cost us a high interest - over 6% per annum. This is very high. The standard interest on the Euro market is a maximum of 3% per annum.
Since we have a low financial rating, if our bonds are bought, it costs us three times as much.
- Why have we been living in debt for all these 26 years?
- We have a financial pyramid, not an economy. If we refinance three quarters of our debt every year, i.e. take new loans to give back the old ones, it is extremely difficult to break out of this pyramid. Our government debt is only growing. If the external debt is not growing, the government one is.
The only way out of this trap is a more productive economy, which we do not have today.
- Do top officials realize that the model offered by Lukashenka has driven the country into a deadlock?
- I guess they do. As they say, the top officials do not command, they only follow orders. They certainly see and understand everything.
- Have there been any examples in the world when countries broke out of such debt?
- Yes. Russia paid off its former Soviet debts, but mostly due to oil and gas exports. Mexico used to be in debt. Again, the oil field in the Gulf of Mexico helped it to cover big debts. The best example is Brazil, which raised the efficiency of its economy. It also had big debts.
There are opposite examples. There are many countries with government debt exceeding GDP. If they are developed economies, they can cope with such debt. If they are like Belarus, they suffer hardships. For example, such a small country as Lebanon declared official default in March. They refused to pay off their bonds that matured. As far as I remember, Lebanon's national debt was 160% of GDP. That's the worst example.
Only structural reforms can save Belarus.