How to get out of the crisis without reforms? The Belarusian authorities confront growing economic problems

Abstract:

2015 saw a drop in Belarus’s GDP for the first time in almost 20 years, which was primarily the result of a significant reduction in levels of production and export. As a consequence, there was also a serious depletion of the country’s foreign exchange reserves, as well as a progressive weakening of the Belarusian rouble. The macroeconomic figures from January and February 2016 showed that these trends were not only continuing, but they were also becoming even more severe, which confirmed that Belarus found itself in a prolonged economic crisis.

On one hand, the reason for this state of affairs was the protracted economic recession in Russia, which was Belarus’s main economic partner, together with the drastic global decline in prices for fuel, which was a key Belarusian export. On the other hand, meanwhile, an equally important reason for the current crisis was the failure of the Belarusian economic model. President Aleksandr Lukashenko, out of fear that his authoritarian system of government would be dismantled and that public discontent would rise, categorically rejected the proposals for even partial reforms put forward by some of his entourage, who were aware of the need for the immediate transformation of the country’s anachronistic and very costly economic model, based on quasi-Soviet management policies.

In this situation the Belarusian authorities adopted a familiar tactic in order to obtain large, low-interest stabilisation loans, principally from the International Monetary Fund and the Russian-controlled Eurasian Stabilisation and Development Fund. In the context of Minsk’s new opening in its relations with the EU, a possible thaw with Washington, and its close cooperation with Russia, it seemed quite probable that it would obtain financial support.