Belarus Devalues Its Currency

Publication: Eurasia Daily Monitor Volume: 6 Issue: 6

On January 2 residents of Belarus learned that the national currency—the Belarusian ruble (known locally as the zaichik or hare)—had been devalued by 20.5 percent against the US dollar, falling from around 2,200 to 2,650. In November and December the administration of President Alyaksandr Lukashenka had denied that such a move was in the offing. The announcement has not only derailed the vision of a unique Belarusian path in economic development, with progress linked to strong state intervention, but it has led to panic buying and uncertainty among the population as to what the new year will bring.

On December 31 Lukashenka informed citizens that the New Year 2009 would be “complex.” Subsequently, a week transpired before the government offered the public an explanation of the devaluation. Lukashenka associated it with the government’s request for a $3 billion loan from the International Monetary Fund as well as the need to lower the prices of exports to Russia. It appears, in fact, that devaluation was one of the conditions requested by the IMF (, January 9).

Lukashenka offered more explanations to his countrymen in an interview to leading members of the mass media (those officially recognized by the regime), which was published in the main presidential organ on Sunday. The questions addressed the new crisis in stages, asking the president first how he would characterize the place of Belarus in the international arena and its prospects for future development. The president stressed the need for the normalization of relations with both Russia and the European Union before regressing to the losses of Belarusians in the Second World War. The independence of Belarus was attained essentially through the victory over Nazism, he stated (Belarus’ Segodnya [SB], January 10, 11).

He continued by recalling that the Belarusian state had survived two earlier serious economic crises: the first in the mid-1990s, a situation he inherited when he became president in 1994; and the Russian financial collapse of 1998. Today the essential thing for Belarusians, he stressed, was to avoid panic and “strongly,” “correctly” ease their way out of the current dilemma. In this respect, the situation was not yet critical. On the other hand, he emphasized, Belarusians needed to recognize that not everything depended on the authorities, but rather much of the onus lay on the people. If they understood the need to work diligently and calmly, then all the problems could be overcome; but if they began to panic or start buying items such as televisions and refrigerators by the dozen, the situation would only be exacerbated (Belarus’ Segodnya [SB], January 10, 11).

That is, however, precisely what Belarusian residents have begun to do, largely because of the lack of warning from the government that devaluation was about to take place. Although the official rate to the dollar remained stable, one newspaper reported that “People want to buy dollars.” Taxi drivers were buying them for BR2,500 to BR2,600; at markets the exchange rate was BR2,800-2,850; and sales of refrigerators and CDs were being made at a rate of BR3,000. On January 6 one of Belarus’s largest tourist companies announced an exchange rate of BR3,250 to the dollar (Komsomolskaya Pravda v Belorussii, January 9). Lukashenka criticized people who rushed to stores to buy five or 10 television sets and refrigerators before devaluation took effect as “stupid,” because prices were falling. It was preferable, he stated, to keep money in bank accounts.

Former Chairman of the National Bank of Belarus Stanislau Bahdankevich commented that devaluation was necessary and should have been done earlier, but the Lukashenka regime had lacked the will to carry it out. In his view, the government had also failed to exploit earlier advantageous opportunities for privatization and technological improvements to industry. Rather than introduce gradual devaluation, the government, by its harsh measure, had imposed a huge burden on citizens who had also seen their heating bills rise this year by 30 to 35 percent (Belorusy i Rynok, January 5-12).

The president’s latest pleas for foreign loans hardly promote confidence. Over the past month he has asked Russia for a loan of $3 billion (initially $2 billion) and the United States for $5 billion (Associated Press, December 22). Together with the forthcoming IMF loan, the requests reflect the expenditure of most of the country’s gold and hard currency reserves in a failed bid to maintain the value of the currency. The average wage has fallen “overnight” from $400 to $333 per month. Although the price of Russian gas for 2009 has not been finalized, a Russian source has suggested that a relatively low price may be dependent on Belarus’s recognition of the independence of Abkhazia and South Ossetia (RIA Novosti, December 22).

Lukashenka is correct to point out that the crisis is international and is affecting much of the world. Psychologically, however, Belarusians were simply not prepared for the sudden announcement. Lengthy speeches about the importance of state independence and the sacrifices made in a war that ended nearly 64 years ago are unlikely to placate residents advised for years to accept a benevolent state-run economy that was supposedly immune to fluctuations in the global economy. The regime has lost its main platform: that of an “economic miracle” that permitted residents to live peacefully and prosperously, despite the regime’s lack of democratic foundations and contempt for human rights.