It seems as if suddenly things have started going wrong for Belarusian President Alyaksandr Lukashenka . At least, that is the impression one gains from Belarusian official propaganda. As recently as in August, the Statistics Ministry reported a remarkable 12 percent growth in the country's GDP. When the financial crisis hit Russia that month, Lukashenka boasted that Belarus was the only oasis of economic stability on post-Soviet territory.
In September, Lukashenka vowed to organize "centralized food supplies" to stave off famine in Russia and even offered to act as economic adviser to Russian President Boris Yeltsin. One month later, in October, with Belarus facing serious food shortages, Lukashenka's self-assuredness began to subside. And by November, Lukashenka himself began needing advice. "Why are our people becoming poorer and poorer every month while we are so dynamically developing industry and agriculture?" he asked his ministers at a televised cabinet meeting. None was able to provide an answer.
Signs of a looming calamity in Belarus's Sovietstyle economy began to appear in early September, when Belarusians launched a run on shops in a bid to use up their meager savings before they became completely worthless. Although the National Bank maintained the official dollar exchange rate below 50,000 Belarusian rubles, the street exchange rate plummeted to 120,000. And in noncash transactions between Russian and Belarusian companies, one dollar was equal to 220,000 Belarusian rubles. By the beginning of December, those figures had nearly doubled.
Owing to the de facto insolvency of Russia, which accounted for 70 percent of Belarusian exports before the current economic crisis, Belarusian enterprises have been forced to reduce output and/or hoard products in storehouses. Experts estimate that Belarus's industrial production will continue to slump by up to 12 percent monthly at least for the next four months. Every month, Belarusian revenues fall short by some $100 million because of reduced exports to Russia.
The acute shortage of foodstuffs, which has led to rationing in many regions, may be attributed to several factors. First, Belarus's grain harvest this year was down by 1 million tons, compared with 1997. Second, state-controlled food prices are too low to make food production profitable. Third, Belarus has to supply food to Russia to repay its $250 million gas debt. And fourth, it cannot be ruled out that, owing to much lower food prices in Belarus, some goods are smuggled into Russia and Ukraine, particularly since there are no customs controls on the border with those countries.
To deal with the crisis, the Belarusian president in November set up a "national headquarters"--an emergency task force headed by his administration chief, Mikhail Myasnikovich. In this way, Lukashenka has prevented the cabinet from managing the economy. Prime Minister Syarhey Linh has been subordinated to Myasnikovich and charged with the task of normalizing food provisions in the Minsk region.
None of the administrative measures taken by the authorities to improve food supplies--including the introduction of police and customs patrols on the Belarusian-Russian border--has proven effective, however. In November, the government was forced to increase food prices by an average of 30-40 percent. The price of vodka--which in the former Soviet Union continues to affect political and social trends among the electorate--went up by 75 percent in one fell swoop. Lukashenka publicly blamed the prime minister for that hike, accusing him of "hating the people." The president did not, however, reduce the price.
In addition to price increases, the government has made some other moves toward liberalizing financial policies. National Bank Chairman Pyotr Prakapovich once again pledged to introduce a single exchange rate (to replace the current four) and limited the devaluation rate of the Belarusian ruble to 1,500 rubles per interbank currency-exchange session. Commercial banks have been allowed to sell and buy hard currency at rates exceeding the official one by up to 50 percent. And according to some reports, the National Bank promised the IMF in mid-November to considerably limit money emissions, until now the most popular method of stimulating production in Belarus. In other words, Belarus has tentatively resorted to some market economy tools.
However, it is too early to say that Belarus has moved over to such an economy. Rather, it is the state of economic emergency and the urgent need to obtain a $100 million loan from the IMF that has prompted the Belarusian leadership to take such unorthodox (by Belarusian standards) and unpopular measures. At the same time, facing the threat of trade union mass protests, Lukashenka vowed to control prices after the November hike and not to increase them by more than 3-4 percent a month. And in a successful bid to avert a trade union rally on 2 December, the "national headquarters" pledged to increase wages. Since Belarus does not have large hard-currency revenues, that pledge can only mean printing more inflationary money.
This week, the authorities were able to make the trade unions back down and thereby extinguish the incipient social unrest. But it is hardly conceivable that the government will be able to substantially increase the living standards of Belarusian workers, whose average monthly wage is equal to some $35. It is only a matter of time until workers start making demands again. The authorities, for their part, are finding it increasingly difficult to meet such demands as they continue to shy away from radically reforming Belarus's ineffectual and antiquated economy.
FORMER UKRAINIAN PREMIER ARRESTED IN SWITZERLAND. Pavlo Lazarenko was arrested in Switzerland on 3 December in connection with a money-laundering investigation, Western agencies reported. Lazarenko was prime minister from 1996-1997 and is currently a parliamentary deputy as well as leader of the opposition leftist Hromada party. In Ukraine, Lazarenko was accused of diverting to Switzerland some $20 million in state funds. Since February, Ukraine has sent 20 requests for legal assistance to Switzerland in the case. JM
UKRAINIAN PARLIAMENT SENDS BACK 1999 DRAFT BUDGET FOR REVISION. The Supreme Council on 3 December voted by 312 to 10 to postpone the first reading of the 1999 draft budget until 9 December so that the Budget Committee can revise the document. Many lawmakers echoed the government's criticism that a budget with a zero deficit is unrealistic (see "RFE/RL Newsline," 3 December 1998) and questioned some revenue sources proposed by the committee. In particular, the committee has proposed raising extra money by taxing commercial banks, imposing fees for using Ukraine's air space, and pressuring enterprises to repay loans received under government guarantees. Supreme Council Chairman Oleksandr Tkachenko commented that Ukraine's economy is not yet ready for a balanced budget, Interfax reported. JM
UKRAINIAN CABINET MOVES TO MEET MINERS' DEMANDS. In the immediate wake of the 2 December coal mining strike (see "RFE/RL Newsline," 3 December 1998), the parliament has passed a resolution ordering the government to speed up repayment of wage arrears to miners, AP reported on 3 December. The government responded to miners' protests by ordering mines to give the payment of wages a top priority. It also granted mines tax breaks for 1999 and included next year's expenditures for the coal sector on the list of budget items that cannot be reduced. JM
It seems as if suddenly things have started going wrong for Belarusian President Alyaksandr Lukashenka . At least, that is the impression one gains from Belarusian official propaganda. As recently as in August, the Statistics Ministry reported a remarkable 12 percent growth in the country's GDP. When the financial crisis hit Russia that month, Lukashenka boasted that Belarus was the only oasis of economic stability on post-Soviet territory.
In September, Lukashenka vowed to organize "centralized food supplies" to stave off famine in Russia and even offered to act as economic adviser to Russian President Boris Yeltsin. One month later, in October, with Belarus facing serious food shortages, Lukashenka's self-assuredness began to subside. And by November, Lukashenka himself began needing advice. "Why are our people becoming poorer and poorer every month while we are so dynamically developing industry and agriculture?" he asked his ministers at a televised cabinet meeting. None was able to provide an answer.
Signs of a looming calamity in Belarus's Sovietstyle economy began to appear in early September, when Belarusians launched a run on shops in a bid to use up their meager savings before they became completely worthless. Although the National Bank maintained the official dollar exchange rate below 50,000 Belarusian rubles, the street exchange rate plummeted to 120,000. And in noncash transactions between Russian and Belarusian companies, one dollar was equal to 220,000 Belarusian rubles. By the beginning of December, those figures had nearly doubled.
Owing to the de facto insolvency of Russia, which accounted for 70 percent of Belarusian exports before the current economic crisis, Belarusian enterprises have been forced to reduce output and/or hoard products in storehouses. Experts estimate that Belarus's industrial production will continue to slump by up to 12 percent monthly at least for the next four months. Every month, Belarusian revenues fall short by some $100 million because of reduced exports to Russia.
The acute shortage of foodstuffs, which has led to rationing in many regions, may be attributed to several factors. First, Belarus's grain harvest this year was down by 1 million tons, compared with 1997. Second, state-controlled food prices are too low to make food production profitable. Third, Belarus has to supply food to Russia to repay its $250 million gas debt. And fourth, it cannot be ruled out that, owing to much lower food prices in Belarus, some goods are smuggled into Russia and Ukraine, particularly since there are no customs controls on the border with those countries.
To deal with the crisis, the Belarusian president in November set up a "national headquarters"--an emergency task force headed by his administration chief, Mikhail Myasnikovich. In this way, Lukashenka has prevented the cabinet from managing the economy. Prime Minister Syarhey Linh has been subordinated to Myasnikovich and charged with the task of normalizing food provisions in the Minsk region.
None of the administrative measures taken by the authorities to improve food supplies--including the introduction of police and customs patrols on the Belarusian-Russian border--has proven effective, however. In November, the government was forced to increase food prices by an average of 30-40 percent. The price of vodka--which in the former Soviet Union continues to affect political and social trends among the electorate--went up by 75 percent in one fell swoop. Lukashenka publicly blamed the prime minister for that hike, accusing him of "hating the people." The president did not, however, reduce the price.
In addition to price increases, the government has made some other moves toward liberalizing financial policies. National Bank Chairman Pyotr Prakapovich once again pledged to introduce a single exchange rate (to replace the current four) and limited the devaluation rate of the Belarusian ruble to 1,500 rubles per interbank currency-exchange session. Commercial banks have been allowed to sell and buy hard currency at rates exceeding the official one by up to 50 percent. And according to some reports, the National Bank promised the IMF in mid-November to considerably limit money emissions, until now the most popular method of stimulating production in Belarus. In other words, Belarus has tentatively resorted to some market economy tools.
However, it is too early to say that Belarus has moved over to such an economy. Rather, it is the state of economic emergency and the urgent need to obtain a $100 million loan from the IMF that has prompted the Belarusian leadership to take such unorthodox (by Belarusian standards) and unpopular measures. At the same time, facing the threat of trade union mass protests, Lukashenka vowed to control prices after the November hike and not to increase them by more than 3-4 percent a month. And in a successful bid to avert a trade union rally on 2 December, the "national headquarters" pledged to increase wages. Since Belarus does not have large hard-currency revenues, that pledge can only mean printing more inflationary money.
This week, the authorities were able to make the trade unions back down and thereby extinguish the incipient social unrest. But it is hardly conceivable that the government will be able to substantially increase the living standards of Belarusian workers, whose average monthly wage is equal to some $35. It is only a matter of time until workers start making demands again. The authorities, for their part, are finding it increasingly difficult to meet such demands as they continue to shy away from radically reforming Belarus's ineffectual and antiquated economy.
SWISS JUDGE CHARGES LAZARENKO WITH MONEY-LAUNDERING. A Swiss judge on 4 December charged former Ukrainian Premier Pavlo Lazarenko with money-laundering, AFP reported. Lazarenko has been detained and will remain in custody in Geneva until his trial. The judge said a "relatively large" amount of money has been seized in Geneva. Lazarenko, who was arrested last week (see "RFE/RL Newsline," 4 December 1998), denies the charges and claims the whole affair is an attempt to discredit him and his Hromada party ahead of next year's elections. Two members of Hromada flew to Switzerland on 5 December to "clarify" the incident. PB
WORLD BANK CRITICIZES UKRAINIAN PARLIAMENT FOR DELAYS. Paul Siegelbaum, the World Bank's director for Ukraine and Belarus, said today he is concerned that the parliament in Kyiv is blocking World Bank projects, AP reported on 4 December. Siegelbaum said several projects have been neither ratified nor begun. He added that the bank will suspend $140 million in energy loans unless the Constitutional Court overrules a recent parliamentary ban on raising utility costs. In other news, the Ukrainian News Agency reports that President Leonid Kuchma has ordered the government to study a possible floating exchange rate for the hryvna next year, perhaps as soon as January. The National Bank has opposed such a move. PB