By Katya Andrusz
Belarus is growing increasingly dependent on Russia to shore up its economy as the current account deficit soars and a possible devaluation looms, an opposition candidate in last year’s presidential election said.
“Debts are piling up quickly; they’re just not sustainable,” Yaroslav Romanchuk said in an interview in Warsaw yesterday. “And at the moment Russia is the only country that is bailing Belarus out.”
Standard & Poor’s last week cut Belarus’s debt rating by one notch to B, five steps below investment grade. The downgrade reflected the country’s “heightened vulnerability to negative external financing trends” due to the “deterioration in usable reserves,” S&P said in a March 15 statement.
The former Soviet republic is likely to devalue its ruble as it runs out of foreign reserves because of an “intolerable” current-account deficit, Danske Bank A/S said March 21. “The situation seems to be escalating rapidly,” Sanna Kurronen, a Helsinki-based analyst at the bank, wrote in a research note.
Belarus’s current-account deficit was 15.6 percent of gross domestic product last year, according to data compiled by Bloomberg. By comparison, Greece’s current-account deficit reached 15.3 percent of GDP in the third quarter of 2008 and began 2010 at 12.2 percent before the country had to turn to the European Union and International Monetary Fund for a bailout.
Belarus saw its foreign reserves dwindle to $3.4 billion in December, down 36 percent from a high of $5.3 billion in April 2010, IMF data compiled by Bloomberg show. According to Daniel Krutzinna, a Minsk-based consultant at Uniter Investment Co., reserves have declined by around a third since November.
“The development of Belarus’s reserves since November has definitely been unhealthy,” he said by phone yesterday. “There’s been no catastrophe so far, but the reserves are topic No. 1 at the moment.”
A country of 10 million wedged between European Union member Poland to the west and Russia to the east, Belarus was dubbed the “last dictatorship in Europe” by the administration of former U.S. President George W. Bush. President Alexander Lukashenko, who has ruled Belarus since 1994, was returned to office for a fourth term last year with almost 80 percent of the vote in elections the Organization for Security and Cooperation in Europe said were not free or fair.
While Lukashenko relaxed his hold on the country before the Dec. 19 election, his regime cracked down on demonstrators after the vote, arresting more than 700 people, including opposition candidates.
“Dialogue is important, but it isn’t possible with Lukashenko right now,” Alexander Milinkevich, an opposition leader and a defeated candidate in the 2006 presidential vote, said in an interview yesterday in Warsaw. “There can be no discussions until all the political prisoners have been freed.”
Romanchuk said he believes Russia’s leaders are searching for an alternative to Lukashenko and, after efforts by the EU to forge closer relations with Belarus stalled following the post- election crackdown, there is nobody to stop Russia gaining more control over events in its western neighbor. The EU said on March 21 it was adding a further 19 Belarusian officials to a list of those banned from traveling to the bloc and whose assets have been frozen.
“Russia’s becoming more serious about trying to find a substitute for Lukashenko,” Romanchuk said. “It isn’t out of love for its Belarusian brothers, though. Nobody can tell me Russia has stopped being an empire. They would really like to swallow us.”
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