Five Most Absurd Solutions to Combat Crisis in Belarus
Reading Belarusian news these days feels like opening a German newspaper on April fool’s Day. Some of the news just cannot be true - they must be jokes. But, up to now, not a single of that news has proved to be a hoax.
An observer from the West is used to economic decisions being taken with a cold, sweat and tears. In any case, decisions are made after consultations with economists and discussions in parliaments and television shows. This is why it is difficult for a Westerner to understand declarations of the Belarusian president. In fact, he will be utterly alarmed by them, even if he is not an economist. We discuss the most striking recent decisions and declarations aimed at resolving economic crisis in Belarus.
1. Foreign citizens will have to pay foreign currency for medical services provided to them in Belarus
According to the Health Minister Vasil Zharko, all medical institutions must obtain an appropriate license from the National Bank before 1 July. Foreign students at Belarusian institutions of higher learning will also have to pay foreign currency for medical services. This is presented as a major measure to combat the crises.
While Belarus understandably needs to take measures to attract foreign currency, in reality this measure will have almost no effect. First, according to Zharko, in 2010 medical assistance was provided to 98,000 foreigners, 80 percent of whom were Russian citizens. Most of the patients were Russians living in Belarus on a residence permit. Most of them do not have any access to foreign currency just like Belarusians. And what about the foreign students? Are the mainly Chinese, Uzbek and Turkmen students supposed to pay in Dollar and Euro or in their national currencies? Will private clinics and the Belarusian economy be happy to deal with Yen, Sum and Manat? The amount of currency inflow will remain very limited - Belarus is not a primary destination for Westerners to obtain expensive medical treatment.
2. Car owners with foreign registration plates will only be allowed to buy fuel for foreign currency
This rule was introduced by a joint resolution of the government and the National Bank of Belarus. Foreign drivers (except for those with Russian plates) will only be able to pay in dollars, Euros, and Russian rubles when filling their cars on major motorways and in border areas. In the past, foreigners were supposed to pay in foreign currency only in border areas of Belarus.
It is difficult to understand for somebody from the West why it should be possible to pay in Euros or Dollars at a petrol station somewhere in the East of Belarus, while the same person will be in deep trouble when trying to pay in Euro or Dollars at one of the markets in Minsk. It is even more difficult to understand it in the context of other measures, such as export restrictions, which clearly undermine the effort to bring in more foreign currency into the economy.
3. Belarus has banned the export of some goods beyond the borders of its Customs Union with Russia and Kazakhstan.
The State Customs Committee explained that this was necessary to protect the Belarusian economy after currency devaluation triggered panic buying of nearly all goods across the country. The list of items temporarily barred from exporting includes refrigerators, gas stoves, and other household goods as well as cereals and pasta produced in Belarus.
Although banning the export of Belarusian goods appears to contradict the aim to get foreign currency inflow into the country, it seems absolutely absurd to include Belarusian pasta of all things on the visa ban list. The lucky people who are living in the Western neighbor countries of Belarus certainly will not be so fond of the Belarusian-made pasta (with is of low quality even by objective standards) that come and will buy all the pasta stocks in the country? It is even more puzzling as export to Russian is still allowed without restrictions: most Belarusian food products are sold to Russia and not to the West.
4. Chinese experts have been reviewing Belarus economic policies for two weeks and concluded that Belarus' authorities are generally on the right track.
The Chinese experts also reportedly thought that there was no need to follow IMF recommendations to liberalize the exchange rate. Experts from the Chinese central bank favored a greater administrative involvement in the foreign exchange market and a greater focus on exports.
It seems that having Chinese experts was not a very good idea in the first place. China itself is struggling with inflation, and still they are giving Belarus a loan for purpose-bound projects. So it was a mere step of courtesy to invite the Chinese economists to have a look at the Belarusian economy - which is not at all comparable to the Chinese one. Everybody knows that China is one of the largest export economies in the world with large foreign investments. Belarus, on the other hand has a negative trade balance and negligible amounts of foreign investments.
5. Alyaksandr Lukashenka demanded Belarusian companies not to cooperate with investors who gave up their activities in Belarus because of the crises and raised a possible retaliation against Western companies in general.
According to Telegraf.by Lukashenka recently made a number of remarkable statements on foreign investors. For instance: "Those who left the Belarusian market in a difficult moment won't be back here, if only with my permission, otherwise I will view this as corruption. We'll back those who understand us," said the head of state. He added in response to the latest EU sanctions against Belarus: “If they start annoying us in the economic sphere, we will find tools to respond,” he warned. “Quite a big number of companies operate and have assets here. We can deal a very painful blow to them.”
Belarus does not have the best reputation for treating foreign investors and such statements fail to contribute to their confidence. It will scare those who have courage to invest in the country despite the crisis.
The investors' behavior appears reasonable from an economic point of view. Belarus authorities take many decisions in a populist fashion without any economic justification. Belarus officials, including Lukashenka, should consult economic experts who have a clear strategy before speaking about the economy. When most Belarusians no longer support the Belarus authorities, Western observers and investors are even less likely to do it.