Belarus's economy is so fragile that it is dependent on Russia and the IMF for its stability, argues Mitchell Orenstein. He says the West should not allow IMF money to prolong the regime's misrule.
Mitchell A. Orenstein is professor of European Studies at Johns Hopkins University and has written extensively on European politics, particularly on post-communist Europe.
"Belarusian President Alexander Lukashenko is a master of political survival. But, following a recent 64% devaluation of the currency, the clock appears to be running out on his prolonged misrule.
Lukashenko was forced by the removal of Russian oil-price subsidies in 2009 to beg, borrow or steal enough funds to keep Belarus's economy from collapsing. He tricked the International Monetary Fund into extending a $3.4 billion loan, promising freer elections in December 2010 – only to burn that bridge with a brutal crackdown when faced with an adverse election result and the largest protests his regime had ever seen.
Now Russia has taken a harder line, demanding a high price for loans that are, in any case, insufficient to save the regime. As a result, the Belarusian economy is in free-fall, and Lukashenko's days appear to be numbered.
Lukashenko used the IMF money to keep his state-dominated, inefficient and subsidy-dependent economy afloat through the 2010 elections. But, shortly after the vote, signs of trouble became visible. During a visit I made to Belarus in January, officials refused to forecast GDP growth in 2011, except to say that it would be lower. At a time when most of Europe was starting to recover from the 2008-09 recession, Belarus was going in the opposite direction.
Then, crisis erupted in May, when the country ran low on foreign-currency reserves and traders could not purchase the dollars they needed. The currency, which traded at 3,000 rubles to the dollar in January, collapsed to 8,000-9,000 in mid-May, and the government was forced to devalue the official rate from 3,010 to 4,950, while continuing to restrict banks' ability to buy foreign currency.
As inflation skyrocketed, Belarusians bought anything of value that they could, from food to used cars. Belarus, which had been known (and praised by some) as a socialist haven in Europe, with a relatively generous welfare state and decent, if low, wages, suddenly has become an economic basket case. The public is reaching a breaking point. On 7 June, a hundred cars blocked roads in central Minsk to protest a 30% increase in fuel prices – a daring act in Europe's most formidable police state."
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