Mistreatment of Opposition Activists and Economic Problems in the Focus of Belarus Press
Mistreatment of political prisoners was the primary focus of non-governmental media in Belarus over the last week. Two former political prisoners of the Belarusian KGB fled Belarus following their release on condition that they would not leave the country. Ales Mikhalevich, a former presidential candidate, is currently in Prague seeking political asylum. Natalia Radzina, editor of the anti-government web site charter97.org, fled Belarus yesterday and is rumoured to be in the United Kingdom.
Ales Mikhalevich has already revealed details of the harsh treatment of detainees which may amount to torture. Following Mikhalevich’s lead other opposition activists started revealing details of beatings, sleep deprivation, and other methods of physical and psychological pressure used by security services. Mikalai Autukhovich sent a letter to the Belarusian service of Radio Liberty giving graphic details of abuses in Belarus prisons. He is still in custody.
Independent press has also discussed the harsh sentences dealt to those convicted for participation in the post-election protests in Belarus. Russian citizens were sentenced to fines while most of Belarusians against whom criminal charges were advanced were sentenced to several years in prison. According to independent news weekly Nasha Niva, there are two groups of detainees – those who decided to testify and those who did not wish to cooperate with the prosecution. The first group has been threatened with sentences up to 3 years and those in the second, if convicted, may spend up to 15 years in jail.
Independent media also reported that in the time following the elections, for more than three months, Belarusian authorities have continued to chase and even beat those who participated in post-election protests. Security services use data from mobile phone providers to locate those who were in the area of the protests that took place on 19 December 2011. It appears impractical to chase and question the more than 50 thousand protestors, though the primary aim of such tactics appears to be directed at discouraging people from protesting again.
Another topic, which has been prominently featured in the Belarusian press lately, is the serious economic difficulties being witnessed by a majority of the population. Today it is virtually impossible for ordinary Belarusians to purchase foreign currency in Belarus. The real value of the Belarusian currency is plummeting and subsequently a growing black market for foreign currency exchange has emerged. Belarus has not seen anything like this since early 1990s. The government imposed restrictions on loans and other transactions with foreign currency, which has increased anxiety amongst Belarusians who are trying to get rid of Belarusian roubles fearing the radical devaluation of the national currency.
The Belarusian-language daily Zvyazda and the news agency Belta, both controlled by the government, has devoted significant attention to the measures taken by the authorities to stabilize the market. Belarus Segodnya, the government-controlled newspaper with the largest circulation in Belarus, does not provide detailed coverage concerning either the serious economic problems or the sentences handed out to opposition activists. Instead, it reports about various meetings, which Alexander Lukashenka had with his ministers, his trips to the countryside and measures to improve management of agricultural sector in Belarus.
The topic of economic sanctions against Belarus and situation in Libya is discussed both in independent and governmental press. While all pro-government sources condemn both the economic sanctions against Belarus and the UN-mandated military operation in Libya, there are more opinions on this topic in independent press. Many opposition politicians call to step up the sanctions because nothing else works. Others are concerned that this will further strengthen the role of Russia in the politics and economy of Belarus, which may prove to be detrimental to the development of democracy in Belarus.
Is Belarus on the Brink of Financial Collapse?
The National Bank of the Republic of Belarus has recently started devaluation of the Belarusian ruble. Foreign currency is now officially allowed to be traded at an exchange rate that is deviating as much as 10 percent from the official rate set by the Bank.
The poor competitiveness of the Belarusian economy was the main impetus for an urgent devaluation of the currency. According to Timothy Ash, head of emerging market research at RBS in London, the rapid reduction in convertible foreign-currency reserves would necessitate an eventual 20-30 percent drop in the rate of the Belarusian ruble. Supposing that the RBS analyst is correct, within the next 3 months, Belarus will further devalue its currency by 36-44 percent relative to January 2009 levels. This dramatic devaluation is aimed at decreasing the current account deficit by encouraging exports and limiting imports. In the short run, this may help to revive economic activity; judging it with a longer-term perspective in mind, however, the rebound of the Belarusian economy is highly unlikely.
The widening current account deficit, which presently stands at 16 percent of GDP, may contract insignificantly in the short run: it would be cheaper for foreigners to buy Belarusian exports. At the same time, Belarusians would become substantially poorer and unable to afford imported goods. The fall in imports would also result in a corresponding decline in the national output, and consequently, in exports. In the long run the Belarusian economy faces greater isolation and decreasing competitiveness due to the rising costs of production, such as higher energy and commodity prices.
Prior to the implicit devaluation of the ruble, Belarus claimed to be on a fixed-but-adjustable exchange rate system, a rather unsustainable illusion. The current account deficit depletes the country’s foreign exchange and gold reserves, and once these are exhausted, Belarus will no longer be able to intervene in foreign exchange markets to reverse the depreciation of the ruble oversupplied due to decreasing demand for Belarusian exports. Inevitably, the government will have to devalue the currency even further. The government would not be able to finance a gap on its own because the current account balance stands at negative $8 billion while Belarus has only $3.4 billion in reserves.
The current account deficit is not a usually terminal problem. The US economy, for example, has run large account deficits for several decades. As long as a country’s capital account surplus compensates for the current account deficit, the economy will sustain itself, at least for some time. In Belarus, however, that the capital account surplus is diminishing due to growing international concern for the country’s ability to meet its financial obligations. This fading creditworthiness is reflected in the rising interest rates at which Belarus can borrow on international markets. Thus, the dwindling capital account surplus will not match the expanding current account deficit.
If Belarus fails to conduct a large-scale sale of government-owned assets (privatization) and secure financial support from regional partners, it will enter a cycle of devaluation that may end in a default, driving the general population deeper into poverty.
Privatization and foreign investments in Belarus have long been impeded by the so-called Golden Share Rule, according to which the government had a privilege to participate in the management of foreign enterprise state territory. On March 4, 2008, President Alyaksandr Lukashenka signed Decree No. 144, which abolished the Golden Share Rule. However, because of the growing isolation of the Belarusian economy, the contentious political relations with the West, and the recent economic sanctions, Western investors are increasingly reluctant to buy Belarusian assets. Because the United States and the EU hold a cumulative 33 percent voting power on the Executive Board of the IMF, any decision to lend money to Belarus will be blocked. Moreover, Belarus is set to repay a $2.3 billion IMF loan over the next three years.
A traditional way out is for Belarus has been to turn to its Eastern neighbor, Russia, for more loans. Moscow is increasingly likely to impose unfavorable lending conditions on Belarus, however. It is increasingly willing to offer loans only in exchange for the ownership of the Belarusian state-owned assets. With nearly $483 billion in reserves and the oil prices on the rise, Moscow is in a strong bargaining position, whereas Belarus seems to have no better alternatives than play by Russia’s rules.
The most sensible way out of the economic crisis is selling unprofitable enterprises to private or state investors in the Former Soviet Union and hoping that they can revitalize them. The inevitable consequence of such policies, however, is the rise in unemployment, only partially offset by the expansion of profitable enterprises.
Belarus’ current economic problems are a yet another sign that the country can no longer delay fundamental economic reforms. The example of China in the 1970s could be instructive in this regard. While China is different from Belarus in most respects, the formula for long-term economic success is similar – the introduction of market incentives for agriculture and manufacturing. It is high time for the Belarusian economy to pivot toward the global market and profitability. Foreign direct investment and trade liberalization are crucial.
Finally, it is important to note that while all of the above methods are good in theory, the current political environment hampers their implementation. True economic liberalization and progress are contingent on the fundamental changes in the political environment of Belarus.