 Belarusian president Alexander Lukashenko (left) Russian president Dmitry Medvedev Image: Wikimedia Commons |
But it has been reported that buyers from Russia have purchased meat at reduced prices, crossed the border now that border checkpoints have been removed, and are selling the meat at higher prices, as locals struggle to purchase necessities with the weakened Belarusian ruble.
The currency crisis
Belarus which devalued its currency by 36% in May, is considering another forced devaluation of up to 15% to lower its exchange rate and stem a balance-of-payments crisis.
The ruble whose official central-bank rate is 5,107 per dollar, is going as low as 9,000 on the streets, according to Bloomberg.
With gold and foreign exchange reserves falling 22% to $4.2 billion in the year to August, locals queue outside licensed exchange booths to get foreign currency.
The central bank has raised its refinancing rate to 27% which will be effective September 1. In a bid to curb inflation which soared to 36.2%, the central bank has increased rates by 1,650 basis points this year, according to Dailymarkets.
Troubles with Russia
In July Moody's downgraded Belarus' foreign and local currency government bond ratings to B3. Russia's cheap oil and gas had helped boost the nation's GDP growth, but price disputes and privatization in Belarus strained relations between the countries. With limited foreign assistance from Russia, the country couldn't rely on anyone to bridge its balance-of-payments gap. Now its devalued currency and foreign exchange shortages are hurting its banking system.
Where is all this headed?
Belarus is in a tight spot. If it attempts to get a loan from the IMF, it is widely believed the loan will be blocked by the U.S. and EU which have sanctions on the country because of its human right violations. Royal Bank of Scotland has stopped raising capital for the nation on account of president Alyaksandr Lukashenko's autocratic regime.
The country is racing to deal with this currency crisis. In June, Belarusneft which has an oil monopoly said it would only let foreigners pay in U.S. dollars, euros or Russian rubles when they filled up their car. The country has looked to sell up to 140 companies but they've garnered little interest according to The Financial Times.
Meanwhile Lukashenko has said that Belarus will stop artificially holding its national currency rate from mid-September, instead allowing it to be determined by supply and demand. In May, he optimistically said Belarus would find its foreign currency troubles stabilized in a month or two. It is August, and Belarus is still waiting.
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