Belarus’s economy likely to collapse without public deposits

The economic crisis Belarus faced in early 2007 was nothing compared to what is to come, economists maintain. In late last year and in early 2007, Belarus was on the verge of default, according to the confession made recently by Belarus president Alexander Lukashenka. However, the head of the state calmed down compatriots, saying the crisis was overcome.

Economists are unanimous in stating the opposite. Moreover, the worst times are still to come, they suggest. Our economy is mainly influenced by public deposits, the gold and foreign currency reserves, the planned nature of economy, the operation of industries and the foreign trade balance.

In late 2006 and early 2007 the Belarusians started withdrawing their deposits from banks. However, according to the National Bank of Belarus, deposits increased at 11.3 percent in the first quarter up to Br881 billion against the same period of the last year.

In the view of economist Jaraslau Ramanchuk, banks in Belarus possess $4 billion deposited by the population. What happens if people are to start withdrawing their money again?

“This is a critical figure. Without this money, our economic system will not be able to function that it functioned in the past three years. Besides, Russia is cutting cheap gas subsidies. We do not see any possibilities to raise the competitiveness of our goods at either the Western or Russian markets.

The government will be forced to raise taxes and rates in fall. It is also planned to introduce a duty on property for people that live in multi-storey blocks of flats,” Ramanchuk told our radio.

The president is also worried by the level of imports and exports. He said recently that we were prepared for the abolishment of trade preferences by the European Union. He said we had enough other partners to ship our goods to. Yet, Lukashenka again scared us with a new default. “If we sell fewer goods than import into the country, we will face collapse sooner or later. This is a terrible thing,” he said.

Belarus currently imports goods at $1 billion more that sells. What is the trade deficit figure when collapse starts? Economist Leanid Zlotnikau shares his views on this matter.

“It should not exceed $2 billion. This negative balance has been caused in the first place by the increased prices for the Russian energy resources. Additionally, people tend to buy more imported goods due to the weak US dollar. If this balance remains for two or three years, the situation will be very dramatic,” he told the European Radio for Belarus.

The statements by the president that we were on the verge of the crises but have managed to overcome it are just fairytales, according to Jaraslau Ramanchuk.

“I think this is just an exaggeration in order to boost a positive image and make it look as if the government has made right steps and overcome the crisis. In my view, the crisis did not take place. No doubt, there was a massive withdrawal of foreign currency. But what happened is still far from the real crisis. I think the problems here are starting just now,” Ramanchuk said.

By painting a positive image, the authorities have also created a problem. It will be now harder for them to maintain this image, if the real problems arise.