A gaping current account deficit and depleted reserves have turned Belarus into Europe’s latest economic casualty, raising fears the ex-Soviet state is on the verge of a devaluation or even default.
Economists sounded alarm over the government’s cheap state loans and salary hikes for civil servants, a relentless dash for growth that comes amid an opposition crackdown after unprecedented election protests in December.
The country is now running one of the widest current account deficits in the world at 16 percent of gross domestic product and worries intensified earlier this month when Standard & Poor’s downgraded its debt deep into junk status.
The short-term solution – aside from devaluation or default that would have unpredictable consequences for President Alexander Lukashenko’s authoritarian regime – is likely to be a big bailout from Russia.
Belarussians have been besieging exchange booths in Minsk to buy dollars as they prepare for a devaluation of the Belarussian rouble while yields on the country’s 2015 dollar bonds have soared. Belarus’ foreign reserves shrank $1.4 billion (R9.5bn) to $5.5bn in the first two months of the year as the government tried to cover the current account deficit.
The International Monetary Fund issued a scathing assessment of the government’s economic management, saying its policies were “unsustainable” and urging “difficult decisions”. – Sapa-AFP
blog comments powered by Disqus