BELARUS HIT BY A CURRENCY CRISIS…

The fragility of Belarus’s "economic miracle" was underscored on March 13 by a collapse of the Belarusan ruble on the Moscow Interbank Currency Exchange (MICEX). Belarus’s "black Friday" and the panicky reaction by President Alyaksandr Lukashenka’s regime that both followed the serious external problems facing the Belarusan economy, and lent support to the view that Belarus’s economic recovery is an unsustainable house of cards. (Itar-Tass, Interfax, March 17, 18, 19)

Belarus’s foreign-exchange crisis began when the price of a dollar on the MICEX shot up to 50,000 Belarusan rubles (also known as "zaichiki", or hares) on March 13. By contrast, only 42,000 zaichiki were required to a dollar in early March. (The zaichik also underwent a similar depreciation against the Russian ruble.) Because Belarusan importers of Russian energy must obtain the Russian rubles needed to finance the imports on the MICEX exchange, the 20 percent decline in the zaichik’s value significantly increases the cost of Belarus’s energy imports. Because Belarus is struggling both with rising inflation and a growing trade deficit, higher import costs are not welcome news in Minsk.

Moreover, the zaichik’s collapse was itself the result of Belarus’s inability to keep its finances in order. According to Russia’s Gazprom natural gas monopoly, Belarusan arrears for gas imports increased during the past two months from $95 to $220 million, even though Belarus has traditionally paid for 70 percent of its gas imports through barter, and only 30 percent in cash. Belarus’s growing trade arrears may well therefore have precipitated the zaichik’s collapse, as MICEX traders concluded that Belarusan importers are likely to face increasing difficulties in purchasing and financing energy deliveries.

According to Minsk’s official statistics, the Belarusan economy is one of the CIS’s star performers. GDP is thought to have increased by 10 percent last year, thanks to strong increases in industrial output and investment spending. However, the Lukashenka government’s inability to pay its energy bill or prevent its highly-regulated currency from depreciating dramatically offers further proof that there is less to "Lukanomics" than meets the eye.

… That Is Aggravated by Lukashenka’s Response.