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Belarus: Government Lauds Economic Growth, But Future Uncertain

  • Jan de Weydenthal

Prague, 18 March 1998 (RFE/RL) -- The government of Belarus' President Alyaksandr Lukashenka says the country's economy is growing again, following several years of post-Communist decline.

The government says that the 1997 rate of growth reached ten percent. Its claims are backed by official figures, which correspond to officially set production targets.

These economic claims carry an important political message as well, boosting Lukashenka's popularity as a strong and effective leader. But it is not certain whether the officially proclaimed "economic boom" will continue and whether it will affect the standard of living of the population at large.

Critics of the government are saying that the "boom" is basically artificial, owing much to massive subsidies, derived largely from aid offered to Belarus by Russia and easy credits from the centrally controlled state banks. They also say that the growth is temporary, having been achieved through a massive depletion of currently available but limited resources. And they warn that growing inflation will effectively undercut the economy.

Indeed, the "boom" is closely linked to exports to Russia, with which Belarus enjoys a free-trade agreement. In addition, Belarus imports the much needed energy resources, oil and gas, at lower prices that those prevailing at the world markets.

Belarusian economist Liavon Zlotnikau, who served as advisor to the disbanded parliament, and advises the World Bank, has told RFE/RL recently that "lower prices for energy resources give Belarus approximately $400 to $500 million dollars per year in indirect Russian subsidies."

Zlotnikau also said that Belarus profits from the Custom Union with Russia, allowing it to develop extensive barter-trade links with various Russian enterprises.

The official Belarusian figures show that credit to state-owned enterprises, particularly in agriculture and housing, more than doubled last year reaching close to $400 million dollars in the $18 billion economy. The Belarusian Central Bank has recently announced that it extended about $100 million worth of loans to housing alone in 1997.

This level of credit made it possible for a great majority of enterprises to show growth. But could this practice be sustained for long? And could one regard a credit-based growth as healthy?

In the meantime, economic assets are decreasing. According to available statistics, in 1997 the current assets of Belarusian enterprises decreased by ten percent, a serious development in the situation of increasing inflation. The rate of inflation grew from 39 percent in 1996 to 63 percent last year.

The rate of inflation in January reached 3.9 percent. Lukashenka's response was to ban price increases by an administrative decree. Two days ago Lukashenka instructed Prime Minister Serhei Ling to "prevent monthly inflation from exceeding two percent."

In effect, the Belarusian economic system is rooted in the old-style, Soviet-type command economy, in which production targets are set by central planners, and all economic activities are regulated and directed by the government.

The Lukashenka government has refused to introduce any form of economic market-oriented changes. Indeed, it clamped down on the few nascent forms of such changes, imposing prohibitive taxes on private businesses, and imposing tight controls over financial institutions.

Belarus' officially proclaimed economic "boom" has been seen by some observers as possibly prompting some of the transition economy countries to follow its example. But, this seems to be doubtful. The "boom" in Minsk appears to be a short-term phenomenon at best, and could burst at any time, particularly, if and when, Russia decides to end its subsidies to the still authoritarian post-Soviet republic.

The Lukashenka government appears to disregard such prospects, and there is no sign that it so much as even contemplates changing its ways.