Elegant default

• Uladzimir Akulich, “Nasha Niva”
• 5.01.2009, 17:27

Belarusian currency has devalued 4 times as much as Turkmen one, 1,000 times as much as Russian, 100,000 times as much as Lithuanian one.

A real default has taken place in the country. This time it is disguised as a changed mechanism of exchange rate formation. But the mechanism for some reason has been changed in a way that every Belarusian woke up in the new 2009 poorer by 20%. And now the inflation is to rise, and people are to become even poorer. 1% of devaluation in Belarus to cause 1% of price rises, “Nasha Niva” informs.

Such economists as Bahdankevich and Ramanchuk, who support devaluation, are short-sighted. Like the National bank experts, justify the national currency’s decline in value by necessity to support exporters, but according to the Constitution it is the National bank which is to support stability of the national currency. But it is doing just the contrary. By his actions he decreases real income of the population, and thus does not allow forming sufficient internal solvent demand. As a result our country remains dependent on export and foreign markets conditions the time.

With such a policy we won’t ever have exchange rate like in Germany or the US, which consume 80-90% of their own GDP, as they maintained their national currencies for years. A corresponding law was adopted in Germany in the time of German mark. Thus they managed to provide high income of their countries’ population. As it had been declared, we are following the path of China, increasing production, trying to sell the goods abroad; and the economy of the country still stays too dependent on export, that is why devaluation of the national currency takes place from time to time, in order to support price competitiveness of the export; at the same time with every devaluation real income of population decreases, and salaries do not reach the level of developed countries, a really capacious home market is not formed, which could have made the economy of the country less dependent on foreign markets.

Who has prevented our government to create a needed productive potential over the last 15 years? Why citizens pay for the president and his government’s actions who had not trusted foreign investments for so long, and when they thought better, it was too late, as the global financial crisis started?

Over the 15 years under Masherau’s rule in Belarus about 400 large enterprises were founded. And how many enterprises have been created during Lukashenka’s rule? 20 or 30, not more. Who is to pay for the mistake that the authorities could not understand the role of small and middle business, service sector for the economy, which could have become the safety cushion and accumulate part of solvent demand, not allowing it to be covered by import, as a result of which problems with negative balance of foreign trade, growth of state indebtedness to other countries, pressure on the national currency exchange rate. That means, exactly the problems by which financiers justify necessity of ruble’s devaluation.

And again, one should admit sincerely that the national currency’s devaluation is putting money from one pocket, the pocket of the population, into the pocket of the state. Devaluation is nothing but collection of the additional so-called “inflation tax” from the population. As after the devaluation the price hike for imported goods is to take place automatically after the devaluation, and soon prices for domestic goods go after them. With prices advance the indirect taxes are to grow too (such as VAT, excise duties and so on). Their share in the state budget is to make 70-80%. So against the background of decrease of the real income, thanks to this additional money, pensions are even to be increased.

From the moment of introduction of the Belarusian ruble, Belarus is leading in the pace of deflation of the national currency even among the CIS countries, not speaking about the Eastern Europe.

Adding the four zeroes which had been cancelled during the two devaluations, one dollar would cost 26,500,000 rubles (second position is occupied by autocratic Turkmenistan, 7,125,000). To compare with: considering all devaluations in Russia from the moment of introduction of the Russian ruble, 1 US dollar would cost only 29,000 rubles. Lithuania would have 263 litas per 1 dollar; Estonia 117 kronas; Latvia 107 lat per 1 dollar. And in the Baltic countries the devaluation took place in the first years after the collapse of the Soviet Union. After full-value national currencies were introduced, their exchange rate fluctuated, but within the margins of changes of Euro exchange rate to dollar.

The Belarusian currency has lost it value as compared to the dollar 4 times as much as Turkmen, 1,000 times as much as Russian, 100,000 times as much as Lithuanian.

All this would cause low level of Belarusian salaries in dollar equivalent. They are lower even when compared to Russian ones, not to mention Central European. But that cannot be said about prices. In other words, we have had so much devaluation that it would be enough for many years to come.

According to the methodology of the UN, the country which has an average month salary of at least 1,000 is considered a developed country. With today’s collapse of the Belarusian ruble, let us call the things their names, the average level of salaries in Belarus has decreased from 450 dollars in December to about 370 dollars.