the new Government took over in Belarus, its first targets were the IMF and World
Bank, whom it soundly reprimanded for destroying countries with stupid policies.
These organizations for their part did not think that Belarus was an economic
example that should be followed by the rest of the world, and said so rather publicly.
The First Deputy Foreign Minister of Belarus, Sergei Marynov, had stated recently
that "The fund's enforced policies in a range of countries have deepened
and even caused the crises." He called their methods, "old textbook
recipes". Not exactly the kind of rhetoric that you would expect from a nation
begging for alms. However, the Belarus banking system was in total chaos and things
became so appalling after the Russian financial collapse in 1998 that the National
Bank of Belarus, (the Central Bank) was put under federal jurisdiction and its
board was summarily sacked.
However, when push came to
shove, Belarus, which was at this point totally out of funds, crawled back to
the IMF. An IMF official was asked whether they would be sending bundles of money
to Belarus, to which he responded, "To qualify for this facility, even if
they met the technical requirement, they would have to take some measures to show
that they are serious about moving ahead with reforms. That means a reasonably
sensible monetary and fiscal policy, bringing down inflation, not accommodating
inflation from Russia."
This event followed the International
Monetary Funds removal of its representative in Belarus. This unique, unilateral
move was made to signify disapproval of almost everything Belarusian, a most singular
event. Belarus will receive no substantial assistance from the IMF until they
make some major economic adjustments. However, Belarus is unlikely to agree to
those required adjustments.
When Belarusian's are asked
why they country is in so much economic trouble, they almost universally pick
on the "Bunny" as the cause of all of their ills. You see, the Belarusian
ruble, which is called the Zaichik, is most faithfully interpreted as meaning
little hare. Things had by this time gotten so bad in Belarus that the Government
had decreed that it will no longer be taking its own money in exchange for exports.
The International Monetary Fund is convinced that this only causes even more bunnies
to circulate in the country, driving down the currency further and further. This
is somewhat akin to the ability of rabbits to reproduce in a non-predatory environment.
One doesn't have to look any further than Lukashenko though,
to see the essence of the problem. Literally all goods and services produced or
imported into Belarus are first purchased by the Government and then resold by
the state. They are purchased for bunnies, which are printed in whatever number
is necessary to complete the transaction. Belarus has hardly created a system
of economic checks and balances, and practices literally no fiscal responsibility.
Many believe that the country is quickly approaching the time when the paper that
the bunny is printing on will be worth more than the Belarus' underlying currency.
Anti-inflationary regulations were enacted to stem retail
price escalation, however these laws are easily circumvented. Belarus has created
a totally unworkable system in which all goods and services sell at state-established
prices. However, most product manufacturers change the name of what they are selling
each month, convinced that the same product under a different name would escape
government price constraints. However, this makes it most difficult for consumers
and shopkeepers because brand loyalty has ceased to exist. Advertising to create
product allegiance is a waste of money, and those who do not own a handy printing
press to change labels may have it even easier; they saunter to the local black
market to unload their goods, usually finding willing buyers.
average Belarusian takes home less than $100 a week and the average retiree receives
only $25. When you consider that substandard housing takes $50 per month out of
each paycheck, we must compliment the people on coping with this critical problem.
Making matters much worse, at the level of $100, a government friendly ninety-
percent income tax kicks in, making the incentive of earning money from that point
Moreover, all oil, gas and power is purchased
from Russia, but when the Communist breakup occurred, the Russians not only required
that the Belarusians repay old bills which had been incurred due to substantially
below market subsidies, but raised the price to levels competitive in the world
market. Thus, Belarus, not having any money, had to send Russia what they had.
This included refrigerators, tractors and other hard goods, amounting to over
$300 million which had been earmarked for their population. Now, just meeting
the monthly charges assessed by Mother Russia requires almost everything the country
can produce. Belarus has entered into what could best be called a death spiral.
Amid Belarus' fancy economic footwork, infrastructure development
is rising about as fast as a lead balloon and manufacturing equipment has not
been upgraded for a decade or more. Thus, the quality of Belarus products is on
a downward curve that may continue until the government falls, or in the alternative
until everyone packs up and leaves the country. No new capacity is foreseen; thus
there will be no production increases in the visible future. This has indeed become
the land of the hopeless.
Exemplifying the Belarus system
of voodoo economics is its vehicle production industry. Everything in Belarus
that has wheels is a tractor. Ford, the only foreign manufacturer to set up shop,
has long since pulled out because of bureaucracy and opaque government practices,
after seeing $19 million go down the drain in short order. Although a few automobiles
are produced in Belarusian factories, in this country, the tractor is indeed king.
In its heyday, Belarus supplied the Soviet Union with tractors from its sprawling
Minsk Tractor Works. The former satellites, no longer required to purchase the
inferior products manufactured in Belarus, are buying Western. Belarus is left
with only a couple of customers, of which Russia is the biggest. A few are sold
into the world market and domestically. Moreover, although the plant, which is
located in Minsk, previously turned out 100,000 tractors a year and had a labor
force of 20,000, today produces 20,000 tractors and still has a labor force of
Although most tractors in the country are not even
used anymore on the farms because of the high relative cost of fuel, the production
line spews these vehicles out continuously. Everyone who needs a tractor in Belarus
can get one on easy credit, and repaying the debt is simplicity personified, just
let the huge Belarusian inflation run its course and the tractor becomes virtually
free to the buyer. If that is the case, then how can the Minsk Tractor Works come
even close to breaking even? The answer is that it cant, but the government
has little choice but to leave it open, its about the only thing that is still
functioning in this pathetic country that continues to go ever deeper into the