Updated at 18:07,08-09-2017

Is Belarus on brink of multiple devaluations?

Belarus in focus

Over BYR 200 trillion will be allocated from the state budget for the implementation of the Agro-business development plan for 2016-2020. Previous programme has failed and allocated funds have contributed to the devaluation of the national currency. Since Belarus has to fulfil the terms of the EFSR credit agreement, which restrict soft loans from the state, she is likely to attempt implementing most of the plan, while exceeding soft loan volumes in order to ‘overcome recession’.

On March 11th, 2016 the Programme aiming to create conditions for sustainable development of agriculture was approved. To implement the programme, the state will allocate more than BYR 92 trillion from the state budget and BYR 120 trillion of loans, of which more than BYR 30 trillion - soft loans for current operations and investment projects in the rural area.

If implemented, the programme should help increasing exports of agricultural products and foodstuffs to USD 6.2 billion by 2020, and labour productivity in agriculture by 1.4 times compared with 2015. About BYR 30 trillion will be spent on agricultural equipment, mainly domestically produced, which should also stimulate domestic engineering.

This programme is a continuation of the previous state programme for sustainable rural development in 2011-2015. It was supposed to achieve, by 2015, equal average wages in agriculture and in the country, USD 7.2 billion worth of export in agriculture, and profit margin at 10-11%. In December 2015, wages in agriculture were 65% of the national average, the profitability of sales at 2.4%, export of agricultural goods at USD 3.6 billion and more than 60% of agricultural enterprises were unprofitable without the state support. Significant funds allocated for the programme implementation have led to increased pressure on the national currency and subsequent devaluations in 2011-2015.

In 2016, Belarus will start a new rural development programme, which is likely to create preconditions for artificial economic stimulation amid economic decline by 4% and eventually will lead to devaluation of the national currency.

That said, Belarus has signed a loan agreement with the EFSR, on the condition that she will restrict soft loans to the economy. Without the state funds, the agro-development plan is not feasible. In these circumstances, Belarus may try to implement most of the terms of the loan agreement except those connected with the soft loans under the pretext that she needed to overcome recession and increase food supplies on the Russian market.

Overall, Belarus is attempting artificial means to overcome economic decline.