Belarus counts on new loans to close international deficit
The National Bank of Belarus on December 12, 2011 increased the refinancing rate from 40% to 45%. By gradually rising interest rates the authorities fulfill the requirements of the ACF of the EurAsEC. Raised rates will significantly reduce business activity in the country and strengthen recessionary expectations.
The EurAsEC Anti-Crisis Fund will make the second transfer of $ 440 million to Belarus in December.
The National Bank forecasts that the volume of international reserves by the end of 2012 will amount to $ 7 billion. The main sources of foreign currency proceeds are projected from foreign direct investment ($ 3.7 billionfrom privatization), and from foreign borrowing by banks ($ 1.7 billion).
It is extremely important for the Belarusian authorities to receive all tranches of the USD 3 billion loan of the EurAsEC in 2011-2013 (USD 1.24 billion in 2011).
To this end the authorities are going to fulfill the requirements of the ACF and gradually raise the interest rates. On December 12, 2011 the National Bank of Belarus raised the refinance rate by 5 %, from 40% to 45%. At the same time interest rates for bank liquidity support operations were raised from 65% to 70% per annum.
Higher interest rates are still far from positive values as the annual inflation exceeded 100%. However this increase was enough to receive the following transfer of the EurAsEC Anti-Crisis Fund.
In the meanwhile increased rate becomes an additional factor that “cuts down” domestic demand from businesses and residents. Therefore 5% of the GDP growth will require significant emission injections, which will stir upinflation and will cause a new wave of devaluation expectations. The only way to achieve 5% of the GDP growth not via emission and in compliance with the EurAsEC and CES requirements is to increase exports by at least 10%, which is particularly challenging, given the low competitiveness of Belarusian enterprises.
Over the past year, military-political relations between Minsk and Kyiv have become complicated. Due to their high inertia and peculiarities, this downward trend would be extremely difficult to overcome.
The root cause of the crisis is the absence of a common political agenda in the Belarusian-Ukrainian relations. Minsk is looking for a market for Belarusian exports in Ukraine and offers its services as a negotiation platform for the settlement of the Russo-Ukrainian war, thereby hoping to avoid political issues in the dialogue with Kiev. Meanwhile, Ukraine is hoping for political support from Minsk in the confrontation with Moscow. In addition, Ukraine’s integration with NATO presupposes her common position with the Alliance in relation to Belarus. The NATO leadership regards the Belarusian Armed Forces as an integral part of the Russian military machine in the western strategic front (the Baltic states and Poland). In addition, the ongoing military reform in Ukraine envisages a reduction in the number of generals and the domestic political struggle makes some Ukrainian top military leaders targets in politically motivated attacks.
Hence, the criticism of Belarus coming from Ukrainian military leadership is dictated primarily by internal and external political considerations, as well as by the need to protect the interests of generals, and only then by facts.
For instance, initially, the Ukrainian military leadership made statements about 100,000 Russian servicemen allegedly taking part in the Russo-Belarusian military drill West-2017. Then the exercises were labelled quazi-open and military observers from Ukraine refused to provide their assessment, which caused a negative reaction in Minsk. Further, without citing specific facts, it was stated that Russia was building up its military presence in Belarus.
Apparently, the Belarusian and Ukrainian Defence Ministries have entangled in a confrontational spiral (on the level of rhetoric). Moreover, only a small part of the overly hidden process has been disclosed. That said, third states are very likely to take advantage of the situation (or have already done so). This is not only about Russia.
The Belarusian Defence Ministry officials are restrained in assessing their Ukrainian counterparts. However, such a restraint is not enough. Current military-political relations between Belarus and Ukraine are unlikely to stabilise without the intervention of both presidents.