The Belarus Economy is Tumbling Down

June 15th, 2011   Articles | Belarus | Countries and Regions | Eastern Europe | Free Belarus

The Belarus economy is tumbling down. Though, President Lukashenka is denying the crises: Since January 2011, in order to deal with the financial meltdown the government has devaluated the national currency by 56% against the US dollar. As a result of this the prices in the stores are rising, and the Belarusians are suffering.

“Crisis in Belarus?! You know, a crisis is when enterprises are closed down because there is no demand for their goods, when it is impossible to sell products and people are forced into the streets,” said Aliaksandr Lukashenka during a recent press-conference at the National Library in Minsk denying any economic problems in the country.

Belarus has been struggling for some months to pull out of the foreign currency crisis, which is mostly fuelled by President Lukashenka’s populist economic policies. The result is a massive devaluation of the Belarus roubel against the dollar. The country has lost more than a quarter of its foreign currency reserves compared to before the devaluation in May. On June 1, reserves stood at $3.6 billion, down from $5.0 billion on January 1.

Since January 2011, in order to deal with the financial meltdown the Belarusian government devaluated the national currency by 56% against the US dollar. The crises was sparked by a rise in Russian energy prices, populist wage increases and a huge public spending campaign prior to the December 19, 2010, presidential election. As a result the prices for vitally important goods are rising fast while people’s salaries are tumbling down.

Today panic-stricken Belarusians hurry to buy dollars and euro. At the same time, unable to buy foreign currency, people buy all they can from stores; both to stock up on food as well as to invest in tangible goods, that is anything that will not lose its value as quickly as the national currency. Home appliances, electronic equipment and other durable consumer goods have vanished from the shelves.

For the past months people waiting in long lines by banks and exchange offices have become a common feature in citizens’ everyday life. In hope to be able to buy foreign currency every morning and every evening people check out lists of individuals that have signed up to buy currency.

The devaluation of the Belarusian currency means that wage earners cannot afford the same amount of goods today as they could before. The President’s promise in the election campaign 2010 of a $ 500 average salary was kept only for two months. Today, even buying groceries is a frustrating chore for the majority of the Belarusian citizens, whose real income has shrunk to less than a third of what it was before the financial crisis.

Since the beginning of 2011 the prices of most groceries in Belarus have increased; potatoes (35,2%), vegetables (32,2%), fruits (29,4%), grits (27,1%), sugar (20,1%). According to official figures, prices for fruit leapt by a staggering 50 percent in May alone, while prices for tea rose by 46 percent and fuel prices by almost 20 percent. Sometimes department stores are marking up the goods several times per day!

The rising fuel prices, some say by 20% since May 24, has led to long queues of cars at the gas stations and hundreds of motorists staged a protest rally along Minsk’s main thoroughfare, hooting their car horns and raising the lid of their trunks to demonstrate dismay at the gasoline price rises.

The day after the protest, President Lukashenka ordered to slash the price:  “Let us agree that from tomorrow morning, gasoline will cost … no more than 4,500 roubles ($0.81),” he said.

Russian-led Eurasian Economic Community agreed to provide the Belarusian government with a $3 billion loan over three years on conditions of cutting the budget deficit and carrying out a $7.5 billion privatisation programme.

Though, realising this will not be enough. Minsk has sent a request to the International Monetary Fund (IMF) for a loan of up to $8 billion. But the fact that Belarus’s relations with the West have worsened after the violent crackdown on protest following the presidential elections last December, makes it much more complicated for Lukashenka to receive any financial support from the West. 

The relatively small and isolated Belarusian economy is in a deep crisis which step by step is turning into an increasingly serious political threat and challenge for the Lukashenka’s regime. The dissatisfaction and anger is spreading among citizens across the country. Internet is turning into a more and more popular place where Belarusians unite against the authoritarian regime. Belarus’ most popular Internet networks call on citizens to go out and show their disagreement with the government and demand political and economic changes through “silent protests” every Wednesday at 7.00 p.m. in central square of their towns. 

As a response the dictator Lukashenka, who is blaming journalists and the Internet for stoking panic among Belarusian citizens, warned that he will not tolerate further street protests.

Text: Juras Stankevich,
Sources: Belsat, NashaNiva, Reuters Russia; etc.

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