Belarus


Econ 228


Belarus


Belarus during its transition from a socialist economy to a market economy took a path different when compared to the route many other former Soviet bloc countries took. There were many factors of reform Belarus took that affected the turnout and where the country stands today. These factors resulted in Belarus emerging as one of the least reformed of all countries but more seemingly able to return to its original shape. Belarus re-established state despotism after its transition.. In economic reform the European bank for Reconstruction and Development ranks Belarus 25th out of the 26 transition economies in overall progress. Belarus during its transition to become a market economy made many decisions that had many results which is responsible for the economy how it stands today.


Even though Belarus had a poor record on structural reform and stabilization there are several reasons how they successfully restrained a decline in output. Belarus is only successful when compared to other CIS countries, when looked outside at other transition economies they are just average. Belarus also has the benefit of cheap energy imports from Russia. Thirdly, by provided large credit to enterprises and subsidies, the state protected output from falling at an early stage of the transition. Lastly by not privatizing large enterprises gave the state control of the assets to avoid any extreme cases of tunneling and asset stripping. These acts suggest that state ownerships and control played an important role in maintaining industrial production cushioned economic growth.


In 1991, after reaching independence, Belarus had one of the highest standards of living in the former Soviet Union (FSU). “It was seen as an industrial park for consumer goods, with relatively better capital stock than other republics” (World Bank). However, the economy was very vulnerable because it became so dependent on the FSU. The FSU was responsible for importing 90 percent of its energy and 70 percent of raw materials.
Even though the country has recently passed through several stages in its political and economic development it still retains many features of a planned economy. Belarus retains a small level of development of small and medium enterprises and an unreformed agriculture sector. The Government holds significant power to manage the factors of production and the power of making many economic decisions.
The mains sources of economic development are trade, services and the industrial division. In 2000, industrial production was estimated at 26.5 percent of GDP, agriculture at 11.6 percent, and services contributed 41.7 percent. Belarus exports large amounts of machinery, transport vehicles, chemical and petrochemical products, fibers, fertilizers and transport services. However, raw materials remain the main import, most coming from the Russian Federation, where the majority of foreign trade (approximately 60 percent) is concentrated.
Over the past few years, macroeconomic stability has been an important issue for Belarus. Inflation reached 50 percent in 2001 and over 100 percent in 2000. The Government then took action and announced the unification of the exchange rate and adopted a market-based monetary policy. This helped the foreign exchange policy in the fall of 2000 and helped to improve the confidence in the economy and gave initial contact with International Financial Institutions.
In the area of education, social services and health, the Government maintains an expensive input-based approach (World Bank). There are new designs in progress to help the social and health problems today. Poverty in recent years has been somewhat influenced by the political and economic impacts. The situation peaked in 1999 at 46.7 percent of population which sits below the national poverty line. But after the government’s moves to increase wages and curb prices the situation subsided in 2001 at 28.9 percent.


One of Belarus’ best decisions was joining the World Bank in 1992. The Bank assisted the country by implementing many policies that assisted economic growth and the bettering of lives for the citizens. The World Bank improves social policies by implementing a system of assistance that targeted those in need by provided benefits in cash. The country right now has the second highest incidence of HIV and AIDS so the World Bank had to address global public goods to prevent more spread of HIV, AIDS and other diseases. The World Bank also helped open up their economy and society by encouraging transparency and