At the beginning of the current financial crisis in Greece, the European authorities found that Greek official statistics were inaccurate and falsified. The Greeks been reluctant to show the real figures to fog their non-fulfillment of the ”Maastricht Criteria”, which imposes a limit on the level of public debt.  It turned out that the real ratio of the Greece debt to its GDP was four times higher than allowed.

Instead of starting structural reforms, strengthening the private sector, improving fiscal discipline and abandoning the practice of buying political loyalty through subsidies – the Greek government chose an easier way: heavy borrowing. When the debt overload was inevitable, the EC sent Eurostat officials to Athens to find out the real dimension of the disaster. The consequences of what was covered by misleading statistics is still shaking Europe and may undermine the whole Euro project.  A closer look at the situation in Belarus reveals very close analogies.

Unlike Greeks, the Belarusian authorities used both lending and printing money to keep their economy going. Like Greeks, they wanted to hide the results of their disastrous economic policy by manipulating the financial data.  However, it is unlikely that a Eurostat delegation will be invited to Minsk to verify the data.

The economic model of Belarus is similar to the market state capitalism of the late Yugoslavia. About 85% of GDP accounts to state owned or controlled entities. President Lukashenka often praises his economic model as alternative to existing or already collapsed ones. Yugoslav politicians used exactly the same words ("the third way") before their system collapsed.

The whole economical and political ideology of Belarus is based on this model. Initiating serious market-oriented structural reforms would admit that the model has failed – something Lukashenka cannot do. Loosing grip on the economy would mean also loosing a lot of sources for his personal wealth and the well doing of his family members and political comrades. Belarusian authorities do not even seriously consider deep structural reforms, which could be the only sustainable solution.

Cooking the data

To prove the positive results of his model Lukashenka likes to hint all the times to the positive figures from international institutions such as the IMF. Indeed, Belarus GDP growth has been impressive compared to other ex-Soviet  states. The only caveat, often neglected by official statistics, is the fact that Belarus is the only country in Europe with an administrative non-market foreign exchange rate. Therefore ”achievements” of the Belarusian economy need to be interpreted with skepticism. Let us estimate the real value of the Belarusian rouble (BYR) and see how it will effect the data.

In recent history of Belarus there was only a short period where the market formed an exchange rate. On 19 April 2011 the National Bank of Belarus allowed commercial banks to buy and sell foreign currency not on the basis of the official National Bank rates. This lasted  for only about one month.  In this time the selling rate of the US$ (the so called interbank rate) varied in a spread of 1 US$= 7000-9000 BYR.

According to the National Statistical Committee of the Republic of Belarus (Belstat), in June-May 2011 the nominal GDP was 74 254 Billion BYR. Using a realistic rate of 1 US$=8000 BYR the figure for this period is 9,28 Billion US$. Calculated for the full year 2011 the figure should be 22,27 Billion US$ (estimated) or approximately 2 346 US$ per capita.

This realistic figure has a strong impact on various international  rankings of Belarus. In 2010, based on the official exchange rate  Belarus ranked 79 with 5 800 US$ per capita. Using the realistic rate now, Belarus would now rank 123 with 2 346 US$ per capita. Based on the IMF figures for 2010 Belarus, only Moldova, the poorest country of Europe, would rank lower.

Belarusian government is using figures to show the domestic and the international audience its successes, that are just politically motivated and have little in common with the real situation.

The reality is that for more than 3 months Belarus has no convertible currency. This is a unique phenomena in Europe and even in the ex Soviet Union region.  The situation of the producing sector is scary.  Since every factory needs to purchase goods in foreign currency,as input for their production, they are falling more and more in agony. They simply cannot buy what they need because there is no legal possibility for purchasing any foreign currency.  

Unemployment rate is constantly growing. There are many methods to hide it, for instance if a company neither pays salaries nor closes down, the de facto unemployment will not show up in any statistics. A large number of privately owned businesses are not working any more, leaving their former workers without salary. Since they obtain no unemployment benefits,they do not inform any state institution about their unemployment and this group does not show up in any statistical reports either.

Future Outlook

Different to the Greeks, the Belarusian authorities refuse to admit a crisis. All official comments or announcements repeat the "no crises" mantra commanded by the President himself.

The basis for any strategy to improve the current situation should begin with an analysis of why things went the way they did. The Greeks did that and took painful economical and political countermeasures, of course with strong support and advise of their European colleagues. Unfortunately, the Belarusian authorities do not want to analyze the dilemma seriously, mainly for the reluctance to admit that their economic model failed.

The whole problem is the system which simply does not work. The only realistic solution would be to build it up from the scratch. But, as said before, it would mean to accept that the whole ideology of the President have been wrong for seventeen years – something what will hardly happen.

Since there is no serious analysis, the countermeasures initiated are ridiculous and childish, not worth to mention. The helplessness is also shown by the fact that Belarus is asking the Chinese government for economic advise. Help from East or West will only come if there are signs that Belarus is moving in the right direction, economically and politically. So far this has not happened.

The authorities prefer to do nothing other than waiting for fresh money from whoever wants to give it. Most probably they will sell whatever can be sold (Beltransgaz to start with) and continue on their "path of success”.

This will continue until they will have nothing to sell.

AB