Devaluation in Kazakhstan will negatively impact Belarus’ international trade
Kazakhstan’s National Bank has devalued the tenge, Kazakh currency, to pre-empt potential problems in the economy. For Belarus, consequences of this decision will be losses in foreign exchange proceeds and reduced international trade. Belarus will have to devalue its ruble to restore the domestic goods’ competitiveness, which has been lost when Belarusian Customs’ Union partners devalued their national currencies.
On February 11th, Kazakh’s tenge was devalued by 19%.
Kazakhstan’s National Bank decided to raise the upper margin for the tenge exchange rate against the U.S. Dollar from 150-155 tenge per USD 1 to 185 tenge per USD 1. The decision was made to address the Kazakhstan’s emerging problems with current accounts, i.e. growing imports. Coupled with weakening of the Russian ruble, devaluation expectations started growing in Kazakhstan, requiring the National Bank’s intervention. With this decision, Kahzakhstan anticipates to enhance its industry’s competitiveness on the Customs Union market and increase revenues. The decision came as a surprise, provided that Kazakhstan has accumulated significant international reserves – as of February 1st, they exceeded USD 95.6 billion.
In 2013, Belarus’ international trade with Kazakhstan was USD 785.9 million, with Belarus mainly supplying tyres, tractors, harvesting machines, and furniture. As of December 1st, 2013, Kazakh corporate debt to Belarusian enterprises was over USD 200 million. Losses from tenge devaluation are assumed to be negligible, since the bulk of the contracts was in U.S. dollars. Most problems will occur with payment deadlines because of the uncertainty over the stability of the tenge exchange rate. Belarus’ main concern is the loss of Belarusian goods’ competitiveness and reduced exports due to higher prices for imported goods on the Kazakh market. For instance, Belshina plans to offer some discounts to dealers in Kazakhstan to maintain sales. Other Belarusian enterprises exporting to Kazakhstan consider similar measures.
Devaluation in Russia and Kazakhstan on the one hand, and significant international reserves and a more stable economic situation in these countries, on the other, may prompt Belarus to devalue her national currency. Belarusian exporters require weak Belarusian ruble to reduce production costs to revenues ratio. A weak ruble could fix the chronic international trade deficit.
In the past, when the Belarusian government was raising prices on some goods on the domestic market, it argued that it was harmonising prices with its major trading partners. A similar argument could be used regarding devaluation, i.e. linking it with the devaluations in the Customs’ Union partners. The need for devaluation is no longer a question, Belarus only has to choose the way – either to hold a one-time devaluation as in Kazakhstan, or gradual, like in Russia.
For Belarus, maintaining a strong ruble is impractical, given the devaluation in other Customs Union partner states. The optimal solution would be a smooth devaluation, which could solve some problems in the economy and preserve the domestic products’ competitiveness on the foreign markets.
President Lukashenka continues to rotate staff and rejuvenate heads of departments and universities following new appointments in regional administrations. Apparently, new Information Minister Karliukevich could somewhat relax the state policy towards the independent media and introduce technological solutions for retaining control over Belarus’ information space. New rectors could strengthen the trend for soft Belarusization in the regions and tighten the disciplinary and ideological control over the student movement in the capital.
President Lukashenka has appointed new ministers of culture and information, the new rector of the Belarusian State University and heads of three universities, assistants in the Minsk and Vitebsk regions.
The new Information Minister Karliukevich is likely to avoid controversial initiatives similar to those former Minister Ananich was famous for, however, certainly within his capacities. Nevertheless, the appointment of Belarusian-speaking writer Karliukevich could be regarded as the state’s cautious attempt to relax environment in the media field and ensure the sovereignty of national media.
The Belarusian leadership has consolidated the trend for mild Belarusization by appointing a young historian and a ‘reasonable nationalist’, Duk as the rector at the Kuleshov State University in Mogilev. Meanwhile, while choosing the head of the Belarusian State University, the president apparently had in mind the strengthening of the ideological loyalty among the teaching staff and students at the main university in order to keep the youth movement at bay. Previously, Korol was the rector of the Kupala State University in Grodno, where he held purges among the disloyal teaching staff.
The trend for the renewal of mid-ranking executives and their rejuvenation has confirmed. The age of the Culture Minister and three new rectors varies from 39 to 44 years old.