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Belarus: Mounting Economic Troubles Force Changes In Policy

Prague, 8 December 1998 (RFE/RL) -- It seems as if suddenly things have started going wrong for Belarusian President Alyaksandr Lukashenka.

At least, that is the impression one gains from Belarusian official propaganda. As recently as August, the Statistics Ministry reported a remarkable 12 percent annual growth in the country's GDP. When the financial crisis hit Russia that month, Lukashenka boasted that Belarus was the only oasis of economic stability on post-Soviet territory.

In September, Lukashenka vowed to organize "centralized food supplies" to stave off famine in Russia and even offered to act as economic adviser to Russian President Boris Yeltsin.

One month later, in October, with Belarus facing serious food shortages, Lukashenka's self-assuredness began to subside. And by last month, Lukashenka himself began needing advice. In a televised cabinet meeting he asked his government ministers "Why are our people becoming poorer and poorer every month while we are so dynamically developing industry and agriculture?" None of the ministers was able to provide an answer.

In an interview today with RFE/RL, Former Belarusian Prime Minister Mykhail Chyhir provided his view.

"The time to evaluate the consequences of five years of Lukashenka's rule is coming upon us. No doubt exists that these consequences are negative....What is most interesting is that by 1996, when we tried to govern the country based on the experience of other nations, we were able to achieve some pretty favorable results....Now, not one of (Belarus') leaders has an answer for the questions: Where are the pensions and the salaries? Where are the goods in the stores? Where can one buy gasoline? And what awaits us in the future?"

Chyhir, who has announced plans to run for president in elections now due in 2001, said that new leadership is needed that will establish better relations with the rest of Europe.

Signs of a looming calamity in Belarus's Soviet-style economy began to appear in early September, when Belarusians began a run on shops in a bid to use up their savings before they became worthless.

Although the National Bank maintained the official dollar exchange rate below 50,000 Belarusian rubles, the street exchange rate plummeted to 120,000. In non-cash transactions between Russian and Belarusian companies, one dollar was equal to 220,000 Belarusian rubles. By early this month the figures had nearly doubled.

Owing to the de facto insolvency of Russia, which accounted for 70 percent of Belarusian exports before the current economic crisis, Belarusian enterprises have been forced to reduce output or hoard products in storehouses. Experts estimate Belarus's industrial production will continue to slump.

The acute shortage of foodstuffs, which has led to rationing in many regions, may be attributed to several factors. First, Belarus's grain harvest this year was down by 1 million tons from last year. Second, state-controlled food prices are too low to make food production profitable. Third, Belarus has to supply food to Russia to repay its 250 million dollar gas debt. And fourth, it cannot be ruled out that, owing to much lower food prices in Belarus, some goods are smuggled into Russia and Ukraine.

To deal with the crisis, the Belarusian president last month set up a "national headquarters"-- an emergency task force headed by his administration chief, Mikhail Myasnikovich. In this way, Lukashenka has prevented the cabinet from managing the economy. Prime Minister Sergey Ling has been subordinated to Myasnikovich.

None of the administrative measures taken by the authorities to improve food supplies -- including the introduction of police and customs patrols on the Belarusian-Russian border -- has proven effective.

In November, the government was forced to increase food prices by an average of 30-40 percent. The price of vodka went up by 75 percent. Lukashenka publicly blamed the prime minister for that hike, accusing him of "hating the people." The president did not, however, reduce the price.

The government has made other moves toward liberalizing financial policies. National Bank Chairman Pyotr Prakapovich once again pledged to introduce a single exchange rate to replace the current four. Commercial banks have been allowed to sell and buy hard currency at rates exceeding the official one by up to 50 percent. And according to some reports, the National Bank promised the IMF in mid-November to considerably limit money emissions, until now the most popular method of stimulating production in Belarus. In other words, Belarus has tentatively resorted to some market economy tools.

However, it is too early to say that Belarus has moved over to such an economy. Rather, it is the current severe economic problems and the urgent need to obtain a $100 million loan from the IMF that has prompted the Belarusian leadership to take the measures.

At the same time, facing the threat of trade union protests, Lukashenka vowed to control prices after last month's hike. In a successful bid to avert a trade union rally on December 2, the "national headquarters" pledged to increase wages. This week, the authorities were able to make the trade unions back down and thereby extinguish the incipient social unrest.

But it is hardly conceivable that the government will be able to substantially increase the living standards of Belarusian workers, whose average monthly wage is equal to some $35. It is likely only a matter of time before workers start making demands again.