Country Report Belarus December 1998 Main report

Economic policy: Mr Lukashenka feels vindicated by Russia's probs --

Having never expressed doubts about his economic course, Mr Lukashenka was quick to announce that the recent Russian problems fully vindicated his regime's non-Western and highly interventionist economic policy. Speaking recently before a conference of ministers and other top officials, Mr Lukashenka reaffirmed current Belarusian economic policy. The visit on September 30th of Russia's newly appointed prime minister, Yevgeny Primakov, provided the leaders of Belarus with a further public opportunity to stress the success of their own economic policies by pointing to the adoption of similar measures under the new Russian government.

-- and yet maintains contact with the IMF --

Despite this congratulatory tone, Belarus recognises the seriousness of the situation. In particular, it hosted visits in mid-November by both the IMF and the World Bank and has requested an IMF study on the likely social costs of reform. During their visits both multilateral institutions urged reform and condemned Mr Lukashenka's continued reliance on Soviet-style control. They painted a gloomy picture of the economy and predicted a worsening downward spiral unless Belarus returns to a path of restructuring and liberalisation. The IMF mission insisted on seeing signs of reform before resuming its funding, and indicated that it would return within a few months for further discussions. The World Bank will not consider any new loans at the moment, but will continue current assistance through its office in Minsk.

-- which suggests a possible opening to the West

Thus, an important underlying shift seems to be occurring, notwithstanding the president's stridently anti-Western rhetoric and his recent statement that the IMF's visit showed it had understood the validity of his policies. In particular, Belarusian officials have made a series of overtures to the West and have sought to improve relations strained earlier this year by the row over diplomatic housing (3rd quarter 1998). The recently dismissed foreign minister, Ivan Antonovich, stated in a recent interview with a Western newspaper that his country had made "serious mistakes" in its relations with the West and that Mr Lukashenka had written to the US president to assure him that they would not be repeated. The recent reshuffle in the main external affairs ministries, including the dismissal of Mr Antonovich, was accompanied by statements from the president's office that Belarus needed to broaden its economic relations. Nonetheless, it would be easy to overstate the extent of this shift. A senior government official declared in early November that the economic situation was forcing Belarus to find a compromise with the West and with multilateral organisations, but that Belarus would not implement radical reforms. Although Belarus is desperate for assistance, it is not likely to reverse current policies until the situation worsens further. As this will probably happen next year, we expect co-operation with multilateral institutions to increase as Belarus attempts to stave off collapse.

© 1998 The Economist lntelligence Unit Ltd. All rights reserved
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