Stanislau Bahdankevich: While Belarus gets loans there will be no reforms

If the Belarusan leaders don’t find currency feed from abroad, the result in the form of exchange crisis will follow.

Negative balance of foreign trade in January-April 2015 amounted to $934.7 million compared to a negative balance of $604.5 million in January-April 2014, National Statistical Committee of the Republic of Belarus informs.

According to the National Statistical Committee of the Republic of Belarus (Belstat), the volume of foreign trade in January-April 2015 amounted to $17 billion 934.7 million, which is 28.4% less than in the same period last year. Exports fell by 30.5% - up to 8 billion 500 million dollars, imports - by 26.5% - up to 9 billion 434.7 million dollars.

What threat for Belarusan economy lies in misbalance of foreign trade? Where can we find a way-out from the dead-end situation?

Stanislau Bahdankevich, the former head of the National Bank, answers the questions of the “EuroBelarus” Information Service.

- Red ink of foreign trade for 2015 is reaching $1 billion. What happened to the economy?

- We all know what happened – export to Russia fell by 40% with Russia; it fell to the West, too. Import also declined but not that much. The volume of production fell by 7.5%, gross domestic product fell by 2.5% - everything affects the global crisis: situation doesn’t become better but only worsens instead.

- What threat does the red ink of trade of commodities present for the Belarusan economy?

- We have seen the red ink of trade of commodities before, but it compensated at the expense of large black ink of services. I haven’t seen statistic data yet, but if the balance of services compensates for the minus of commodities, it doesn’t have much significance.

Financial deficit worsens balance of payment, increases the difference in the balance of current payment account. I.e. it requires additional foreign loans. If the Belarusan leaders don’t find currency feed from abroad, the result in the form of exchange crisis will follow.

I believe that the state is aware of this problem just like we are and is trying to find financial feed outside Belarus so that to cover up for this deficiency. We know about the ongoing negotiations about new loans with the EEU Anti-Crisis Fund and with the IMF – it seems that the authorities hope to get loans from them.

- How long can such mess in the foreign trade last?

- There were times when Belarus had bigger misbalance; it all depends on whether or not it will be given loans. A difference of $1 billion should be somehow compensated for. But I think that this figure only shows the trade part of foreign trade balance, and together with the balance of services total basis is somewhat less and doesn’t present critical threat for today.

We need to revive export and find new product markets – we have accumulated huge stock of ready-made products. Our stocks equal three-four months of manufacture, and stock of footwear equal almost five months of manufacture – a full collapse by all directions.

- What is the way-out from this dead-end situation?

- The way-out is in realization of the program of complex modernization of Belarusan economy. We need to start reforms right away; we need to start reviving business. What for do we keep unprofitable enterprises? We need to get rid of them and privatize them. Some enterprises need to be sanitized, some should be liquidated, and enlarged; private business, especially small, should be given “green light”.

The important thing for today is not to get new loans but to get direct foreign investments. Singapore, Bangkok, and other countries are using them – so why aren’t we doing it? Why can’t we create conditions that would be acceptable for inflow of investments to Belarus? We don’t need to get loans for $7 billion (that includes not only state loans, but also those in commercial banks and enterprises), but take &5-6 billion of investments. Earlier, if an investor was putting money in Belarus, the state obliged not to worsen terms of taxation and other terms; but now all that is cancelled. We can attract investors today only to raise taxes or introduce “golden share” tomorrow.

The cumulative tax in Belarus is 38-39%, 33% in Russia, and 25% in Kazakhstan. We need to decrease taxes, so that to no longer fund unprofitable sector, agriculture, and industry. All that lies in warehouses is unmarketable, so we have an opportunity both to reduce taxes and expenses.

- Will the current crisis make Belarusan authorities change their economy course?

- If no one gave Belarus money, the authorities would have to introduce reforms. But while we have money, everything is good – why have shock therapy then?