ECONOMIC SITUATION IN BELARUS

Economic situation in Belarus

Economic situation in Belarus

Basic background

Belarus became an independent republic in 1991, after the breakup of the Soviet Union. In 1996, a constitutional referendum, not recognized by the international community, centralized power in the executive branch (president), headed by Alyaksandr Lukashenka. Economic and political reform in Belarus has stalled or is being reversed under his authoritarian government. The Belarusian Government's human rights record remains very poor. President Lukashenka gained a third five-year term as president in March 2006, in an election that international observers judged to be seriously flawed.

Democratic nations, including the United States and the members of the European Union, condemned the subsequent governmental crackdown on peaceful protests in Minsk, and imposed visa restrictions and other sanctions on senior Belarusian officials. As a result of the release of political prisoners in August 2008, the EU lifted its visa restrictions, but those of the United States remain in effect. Both Belarusian and Russian are official languages, and Russian is widely spoken throughout the country, particularly in the cities. Tourist facilities are not highly developed, but food and lodging in the capital and some regional centers are adequate.

Discussion

The difference in a standard of living was rather insufficient in the Soviet era. For example, in 1989 the number of the poor (with average income of 75 rubles and below) was 3.3% in Belarus and 5% in the Russian Federation. In fact, average pay was a bit higher in Russia those days while the neighbors took advantage of owning plots of land for growing fruit and vegetables. The studies of family budgets show that the difference between the mean aggregate incomes of workers and employees in Russia and Belarus eventually ceased to exist at the time.

Market replication is a exact blend of overtly dominant state interference in the financial scheme with some bottom-up market transactions. Hence, this is a hybrid scheme appearing out of the vintage state socialist economy, and blending direct bureaucratic instructions with chosen market incentives. The state intervenes directly into the mechanics of financial transactions by manipulating the financial structure, making principle mistakes, which likely have deeper determinants than simple technical incompetence of the bureaucracy or the unsure natural environment in which these decisions are being made.

The former parts of the Soviet Union took their own paths following the collapse of the Soviet Union. Russia's citizens had to survive “shocking therapy,” a dramatic economic reform program “administered” by ultraliberal reformers. As a result, a third of the country plunged into the dark of poverty. On the contrary, the government of Belarus refused to pursue the “shocking policy.” The authorities treated every novelty in the economy with utmost caution. The state was not keen to let go of the control levers in the economy. A private sector is still a tiny spot on the map. Private companies own about 35% of capital assets in Belarus. The indicator for Russia is twice as larger.

The situation in foreign exchange market is not so ...