Belarus reported a trade deficit of $1.497 billion in 1997, which constituted a 16.3 percent increase over the 1996 deficit. Combined with rapid increases in Belarus’ national debt in 1997 and plans for more of the same in 1998, this growth constitutes another signal that the rapid economic growth Belarus recorded last year (GDP increased by 10 percent) may not be sustainable.
Although the government of President Alyaksandr Lukashenka succeeded in reducing Belarus’s trade deficit with Russia from $492.6 million in 1996 to $5.1 million last year–largely on the strength of bilateral agreements with various Russian regions–Belarus’s trade with the CIS countries (which comprised 69.7 percent of total Belarusan trade) was still in deficit by $555.4 million. The trade deficit with other countries was a whopping $946.9 million, even though non-CIS trade constituted only 30.3 percent of Belarus’s total trade. (Interfax Belarus Business Report, February 16)
Belarus’s total trade deficit of $1.497 billion thus constituted some 10.7 percent of GDP. In the absence of information showing large remittances or inflows of direct foreign investment, this figure suggests that the country is living beyond its means, and that the Belarusan economy will at some point have to undergo a correction. Such worries are reinforced by the news that Belarus’s domestic debt more than doubled last year to 14 trillion Belarusan rubles, or 4 percent of GDP. While this is not high by international standards, Belarus’s crude financial system can only finance such debts by inflationary increases in the money supply. The government debt that is issued must therefore be purchased (for cash) by Belarus’s subservient banking system, and the issuance of new debt in 1998 is slated to rise four-fold over 1997 levels. In such circumstances, increases over the 63 percent inflation rate reported last year are to be expected.