National Bank Reduces Refinancing Rate – Belarus Economy Digest
This April the National Bank decided to its reduce refinancing rate, which has remained unchanged for the past 10-months. This measure is, to some degree, a helping hand for the real sector that is facing significant difficulties at present. However, despite their best intentions, this move may actually lead to serious imbalances and create additional pressure on the national currency.
Unfortunately, there are still no signs of improvement for the Belarusian economy. Its reduced foreign exchange reserves, the ongoing consequences of the potash conflict with Russia, and difficulties with accessing external financing support all have the authorities turning its attention back towards privatisation.
However, despite the potential sale of state property, the government has to reconsider how it goes about supporting and motivating its state enterprises. Evidence of the authorities' continued inefficient use of its budgetary revenues are one of the first places they should look.
Changes in Refinancing Rate
In the beginning of April the National Bank of Belarus (NBB) announced its decision to reduce the refinancing rate by one percentage point. Thus, beginning April 16 the rate has been set at 22.5% while previously it was anchored at 23.5% over the past 10 months. The reasons for this rate reduction is raising some concern amongst experts, largely due to Belarus' rather high inflation rates.
Moreover, the IMF, in its latest World Economic Outlook, expressed expectations that the annual inflation in Belarus will hit a mark of about 16.3% in 2014, which is even higher than the figure in its 2013 forecast (15.5%).
There are a few possible reasons for the NBB lowering the refinancing rate. A reduction of the refinancing rate will decrease credit rates, which makes access to financing for the real sector easier.
This will likely stimulate the economy and accelerate economic growth. However, at the same time, this measure can destabilise the nation's financial sector through an outflow of national currency deposits and put additional pressure on the Belarusian ruble. Therefore, a reduction in the refinancing rate forces the National Bank to monitor the situation in the market even more closely in order not to make it any worse.
Reduction of Foreign Exchange Reserves and Obstacles with External Financing
In March, the foreign exchange reserves of Belarus dropped by $429m (USD) and at the beginning of April they totaled $5.715bn, which is the lowest level they have seen since November 2011. Since the beginning of 2014 a 14.1% reduction in the nation's reserves has occurred, which is around $936m.
These kinds of negative trends are the result of the government's payments on its external debt servicing, a deterioration in the situation with foreign trade and its attempts to control fluctuations, or at least minimise their effects, on the currency market. At the same time there was practically no inflow of foreign currency into Belarus' economy.
Belaruskali, which is one of the main suppliers of foreign currency to Belarus, keeps facing problems and continues to suffer the consequences of its falling out with Uralkali. According to its report on profits and losses, there was a significant drop in all key indicators of its operations. For instance, its net income dropped 4.9 times in 2013 compared to 2012.
In order to improve the company’s position, in the beginning of April the authorities extended its zero rate for export duties on potash fertilisers until the end of 2014. The introduction of a zero export rate first occurred in September 2013 as an act of support and guarantee for the enterprise’s sustainability. Extension of these preferential export conditions will likely help to stabilise and improve Belaruskali's position, taking into account that there are finally signs of market recovery.
With limited access to foreign currency, the authorities have been forced to announce the sale of certain state assets. In the beginning of April the State Property Committee made public a list of shares for sale as well as whole state-owned assets. The list consists of 87 state enterprises and includes the sale of an equity interest in the Mozyr oil refinery plant.
Before that Belarus expressed its desire to sell all of its shares in the Mozyr refinery plant. Today’s revised plan assumes a sale of around 30% of its shares and the state holding onto 25%. There is no clear information available about its price. But taking into account that a preliminary evaluation of the enterprise’s value amounted to $4bn, it can be expected that requested price will be around $1bn.
Another possible source of external financing can come in the form of another loan from Russia. On April 10, 2013 the Council of Ministers of Belarus approved an agreement with the government of the Russian Federation on the allocation of financial credit. However, there has been no precise information made public regarding the amount, timing and terms of the line of credit yet.
Changes in the Treatment of State Enterprises
Financial limitations, combined with unsatisfactory economic results, are forcing the authorities to change the way they subsidise state-owned enterprises. The low level of efficiency of how the state allocates its budgetary resources is one key reason for reforming its current model of providing support.
Beginning in 2016 a new mechanism for state support will implement several changes. First, a number of instruments of support, such as budgetary loans, will be no longer available. Second, it is likely that the lion's share of state financial support will be done using a traditional bank lending system, where enterprises will be responsible for paying interest on its loans. Third, the long-standing 'personal approach' towards specific state enterprises will also cease to exist.
Therefore, it looks like the available channels of support will become considerably more narrow and enterprises will need to find other ways of maintaining their operations and increasing their efficiency. Change could come in many forms, including the restructuring of dated, inefficient enterprises. Those unable to adapt, however, may well just go bankrupt.
Maryia Akulava, Belarusian Economic Research and Outreach Center (BEROC)
This article is a part of a joint project between Belarus Digest and Belarusian Economic Research and Outreach Center (BEROC)
Empowering Belarusian Women to Combat Domestic Violence
Every fourth woman in Belarus has been physically abused by her partner. Just in the last three months, 24 Belarusians have died as a result of domestic violence, a 41% increase from last year.
For decades, impunity for such abuse has persisted in Belarus, a country with a traditional view on a women’s place in society and a troublesome human rights record for both men and women. Domestic violence is finally becoming a public issue and preventative and punitive measures are being taken.
On 16 April, changes to the Law on the Prevention of Offences entered into force. The law now stipulates that first-time domestic offenders shall receive a warning, while second-time offenders may have to leave the premises for up to thirty days.
The campaign “Homes Without Violence” will run from the 15th to 30th of April to convey that domestic abuse is a serious crime. Earlier this year, an international seminar on combating violence against women introduced the Belarusian police to foreign expertise.
In the long term, however, punitive measures have limits. Only empowering women and changing the cultural norms regarding gender roles can fully eradicate domestic abuse. Given the prevalence of gender stereotypes among the rank and file, as well as political elite, this could take a long time.
The Extent of the Problem
Belarus does not collect statistics on domestic violence or its impact on the lives of women and their families. The most recent survey on the prevalence of domestic violence, carried out in 2008, focused on women considered to have had some “family life experience” and living in the urban areas of the country.
The survey uncovered that every fourth woman has experienced physical violence, every fifth – economic violence, and every seventh – sexual violence from their male partners. The table below shows the prevalence of domestic abuse in other countries, using the estimates by Astra Women's Network for Sexual and Reproductive Rights and Health.
The 2012 survey on the situation of children and women in Belarus carried out by the National Statistical Committee of the Republic of Belarus and the UN Children's Fund (UNICEF) provides more recent information about the scale of the problem. Over 8,000 men and women participated.
According to the survey, 11.8% of women aged 15-49 said they had been abused – physically, psychologically, economically or sexually – by their husband or intimate partner. Women living in rural areas are 6% more likely to experience violence than women who live in cities. Despite this high rate, only 4% of women and men said that domestic violence was acceptable.
Factors Correlated with Domestic Violence
A typical Belarusian domestic bully is a man in his thirties or forties, intoxicated and unemployed, according to Oleg Karazei, Head of the Prevention Office of the Central Department for Law Enforcement and Prevention of the Belarusian Interior Ministry. Thus, a high level of alcohol consumption, economic problems, and the lower status of women may contribute to the high prevalence of domestic violence in Belarus.
While alcohol usage itself does not cause domestic violence, many studies have pointed to a strong association between alcohol abuse and violence toward an intimate partner. Alcoholism is a serious problem in Belarus. In 2011, Belarus ranked 10th among 188 countries in alcohol consumption, according to the World Health Organisation.
Second, studies show that abuse often occurs when couples are experiencing financial strain. Economic problems also significantly reduce a victim’s ability to leave and seek help. Belarus has one of the lowest poverty rates of any post-Soviet state.
At the same time, the country experienced a severe economic crisis in 2011, and the economy has not fully recovered since. According to a survey by the Independent Institute of Socio-Economic and Political studies (IISEPS), nearly half of respondents "could hardly make both ends meet; there was not enough money even for food" or "had enough money for food, however purchasing clothes caused serious difficulties".
The Role of Culture and Gender Roles
Most important, the prevalence of domestic violence correlates with the status of women and cultural norms regarding gender roles. On the one hand, the law treats women and men in Belarus equally. The country has acceded to all major relevant international conventions related to the rights of women, including the Convention on the Elimination of All Forms of Discrimination against Women (Women’s Convention) and its Optional Protocol.
On the other hand, discrimination against women on the job market and the so-called “glass ceiling” remain prevalent. Patriarchal notions of a woman's role in the family pervade the social and political sphere. Belarusian women are largely responsible for child upbringing, and President Lukashenka himself views women primarily as “keepers of hearth and home". For example, in 2010 he said, "It is undeniable that the Lord has ordained a woman to be a mother. Regardless of a woman's career, she has to care for her children. I want our women to give birth to at least three children."
Gender stereotypes make violence easier to justify and can prevent women from reporting abuse. Cultural norms play a large role in the way women choose to respond to violence. Women in Belarus, as well as in other post-Soviet states, are expected "not to wash their dirty laundry in public".
This is why the 2012 study found that only 39.7% of women who were abused sought help from others, such as law enforcement officials, medical professionals, or even friends and relatives. Police officers, who are predominantly male, are also not immune to cultural norms and may see domestic violence as a private issue, which lowers their interest in investigating it.
Serious Consequences of Domestic Abuse
The effects of domestic violence go beyond the adverse health consequences experienced by the immediate victims of abuse. Domestic violence destroys families. Belarus already has one of the highest divorce rates in the world; in 2013 there were 414 divorces for every 1000 marriages in the country. The high prevalence of domestic violence may be partially responsible for contributing to this problem.
Domestic violence may also exacerbate the problem of the trafficking of women. According to research by The Advocates for Human Rights in Moldova and Ukraine, women abused at home may seek work abroad and agree to uncertain and risky job conditions. Women’s NGOs in Belarus also view domestic violence as a push factor for human trafficking. Belarus remains a source and transit country for the trafficking of women.
The US State Department has placed Belarus on a tier 2 watch list, alongside other post-Communist states. Tier 2 includes around 90 countries whose governments do not fully comply with the minimum standards for combating trafficking, but are making significant efforts to bring themselves into compliance with those standards.
Long-term Solutions to Domestic Violence
Belarus has made substantial progress in addressing the problem. In addition to the preventative and punitive legal measures discussed above, both governmental and non-governmental organisations have taken practical steps to help victims of violence.
The first Belarusian rehabilitation centre for women and children affected by violence appeared in 1998. Today, 149 such centres exist, in addition to smaller shelters managed by non-governmental organisations and religious institutions.
The rehabilitation centres provide psychological and legal assistance, as well as social support for the victims of domestic violence. Public awareness campaigns can also help address the problem by slowly changing the public's attitude toward domestic abuse.
To eliminate domestic violence in the long term, however, the root causes of the phenomenon need to be tackled. Economic and social empowerment of women can contribute to changing the cultural norms that are permissive of domestic violence.