Lukashenko Against The Belarusian Ruble
- 6.10.2025, 13:08
Devaluation and inflation have become the ruler's signature style.
In 1994, Lukashenko promised to stop price increases forever, make the ruble a stable currency, and make Belarusians rich. As a result, inflation and devaluation of the Belarusian ruble have become a trademark of the Belarusian economic model.
Why regular financial crises in Belarus are the result not only of mistakes in management, but also of a conscious policy of the authorities to redistribute the incomes of Belarusians in their favor - in the new issue of the program "Optimum" on the YouTube channel "Belarusians and the market".
"Rising prices exclude normal functioning of the economy productive labor loses its meaning in conditions when speculation becomes super profitable," said in the election program of Alexander Lukashenko in 1994.
Lukashenko explained to the people even more simply. He said, if you elect me, the prices in the country will not rise anymore. This promise was hard to believe, considering that in 1993 and 1994, price growth was over 2000 percent a year.
So in July 1994, at the first presidential election, Lukashenko was elected president of Belarus. In November, he went on vacation to Sochi to rest after a hard-fought election campaign. A few days after his departure, the government raised prices on a number of products.
When Lukashenko returned to the country, he was furious. He made a public reprimand to the ministers who had so rudely deceived his trust by trampling on one of the main election promises. It was then that the famous - prices back.
But, as witnesses recalled later, all these passions were prearranged. The price increase was agreed upon. Former Deputy Prime Minister Vasily Leonov said that Lukashenko behaved quite differently at private meetings with the government.
"I promised the people to bring the prices back. Men, bring back at least on cottage cheese for a few days. The president can't deceive his people," he said.
Men in the government got into the situation. Prices for some types of dairy products were indeed brought back. However, for a very short time. By the end of the year they had already returned to where they were. In 1995, inflation in Belarus amounted to 250 percent.
Lukashenko did not make any more rash promises that prices would never rise. Prices were hit gently but hard. As a result, the total deficit of everything, as it was in the times of the demise of the Soviet Union, did not return to Belarus. Instead of total deficit, there were regular interruptions with some goods.
Butter, cereals, sugar, and even bread disappeared in the country from time to time. It is from these times that Lukashenko's immortal phrase comes from: "I've just taken up eggs, and the milk is gone."
But the sad experience of the second half of the 90s did not teach the Belarusian authorities anything, as we see. Lukashenko has not given up the idea. Price control, along with control of everything else, was one of the cornerstones of his election program.
The most stable currency in the world
There was also a lot of things said about improving the welfare of the Belarusian people. But it didn't work out so well. From 1994 to 2000, the average salary in Belarus fluctuated between 40 and 90 dollars. This is if to count at the official rate. But the opportunity to buy a dollar at the official rate was the privilege of a select few.
Because in the 90s Lukashenko experimented not only with prices, salaries and the search for a hundred easy ways to cheat Russia and make some money. With no less fervor he experimented with banks and the currency market.
In 1994 the Belarusian ruble depreciated 15 times against the dollar. Denomination, which Lukashenko carried out immediately after his election in August, did not help the ruble for some reason. But the Belarusian authorities managed to do the impossible. They turned the Belarusian ruble into the most stable currency in the world.
In April 1995, the National Bank set the official dollar rate at Br11.500. And after that the official rate of the Belarusian ruble did not change for a whole year. In this world of raging financial passions, the Belarusian ruble remained the only island of stability.
That is, the official rate of the Belarusian ruble. Because the Belarusian ruble had many rates. And the more stable was the official one, the more courses appeared in the country. Therefore, when they told about the salary of 90 dollars on TV, it could give only moral satisfaction. The overwhelming majority of Belarusians saw the official rate only on TV and on signs in exchange offices. In reality, a ninety-dollar salary cost 30-40 dollars.
The money was printed in secret
And in 1998 the welfare of Belarusians was hit mercilessly. Although the famous default happened in Russia, Belarus suffered from it much more severely. But the Russian default became a very convenient excuse for the Belarusian authorities. An opportunity to write off their own miscalculations on insurmountable external circumstances. But in fact, the Belarusian authorities created all their crises themselves, with their own hands. And the crisis of 1998 was no exception.
In Russia, the acute phase of the crisis ended in a couple of months. By the end of the year the dollar exchange rate rose from 6 to 21 rubles. Inflation in 1998 amounted to 84%. In 1999 it slowed down to 36.5%.
In Belarus, inflation in 1998 was 184%. In 1999 it accelerated to 250%. And only in 2000 it slowed down to 140%. The official exchange rate of the Belarusian ruble collapsed 2.5 times in 1998. The next year the ruble did not get better. If the dollar cost Br107 thousand at the end of 1998, then by the end of 1999 it rose to Br320 thousand. It was then that the National Bank of Belarus put into circulation a bill of one million rubles.
By the year 2000, the exchange rate of the Belarusian ruble on the black market fell twenty times compared to 1998.
Because the Russian default was just a trigger for the Belarusian financial crisis. And its real reason was the same as for all other financial crises in Belarus. The Belarusian authorities stimulated economic growth by pumping cheap money into the economy. In order to ensure pleasant indicators of GDP growth, credit emission was doubled in 1998.
As Lukashenko himself admitted many years later: "Without saying anything about it to anyone, we, of course, printed money. And we gave it to agrarian projects."
But the economy still noticed the extra money. The economic growth, for the sake of which the authorities jeopardized the financial stability, suffered no less. According to the results of 1999, the GDP of Belarus fell to $13 billion, from $16 billion in 1998. In 2000, it fell by another 2 billion dollars. It was possible to restore the pre-crisis GDP only by 2003.
But besides voluntarism, lack of understanding of how the laws of economy work and systemic errors, there was another reason why the Russian default became such a catastrophe for the Belarusian economy. And this reason was ordinary greed.
In 1997 and 1998, the Belarusian authorities actively speculated on Russian securities. State-owned banks, state-owned enterprises invested in Russian GKOs, the Ministry of Finance of Belarus invested budget money in them. Even the Belarusian National Bank invested in them with its reserves.
This, by the way, was one of the reasons why the National Bank had nothing to support the falling rate of the Belarusian ruble. It simply had no reserves left. According to later estimates, the Belarusian economy lost $1.1 billion dollars on investments in Russian GKOs.
Well, in fact, greed, not regular mistakes, was the cause of all financial crises in Belarus. There was also a sober economic calculation in the fact that prices were chronically rising and the Belarusian ruble was peaking. A cynical, but quite rational motive. Redistribution of incomes of Belarusian citizens in their favor.
If you get a loan in Belarusian rubles at the rate of 7-10% per annum with two or three-digit inflation, you can not be shy and show any economic miracles. In the noughties, Belarus, together with Russia, became a beneficiary of rising oil prices. Belarus' GDP grew from $11 billion in 2000 to $63 billion by 2008. Ice palaces and just palaces were growing all over the country.
No ruble devaluation will happen
But then the rent ran out and the miracles with it. Alarm bells had been ringing since as early as 2006. In 2007, the authorities even canceled a number of benefits to save a little budget money. Because, of course, no one thought of saving money on palaces and megaprojects.
The people began to worry, and to calm everyone down the head of the National Bank Peter Prokopovich promised that there would be no devaluation of the Belarusian ruble. Then the promise was repeated by Alexander Lukashenko. Moreover, he did it for the last time in his New Year's address.
"The authorities will not allow collapse and chaos. It will not betray your trust," he said on December 31, 2008.
And in the morning of January 1, 2009 the National Bank devalued the ruble by 20%. A little later, the most honest president honestly admitted that he deliberately deceived everyone. So that people would not rush to exchange offices and buy dollars for cheap. Because... well, what use are these dollars to the people. They'll spend them on something stupid anyway. And the state needs dollars more.
Lukashenko promised many times that there would be no devaluation in the country. And each time his promises became more and more devalued. Because the devaluation of 2008 turned out to be just a rehearsal for the collapse in 2011.
The background of the crisis is not original. After 2008, the GDP of Belarus collapsed to $51 billion. The lost billions had to be restored. And before the next elections the people had to be shown the ride of unheard-of generosity again. Cheap loans were again generously poured into the Belarusian economy.
The development of the crisis was also standard. Everything started slowly and gradually. Inflation began to accelerate in January. In February it amounted to 2.7%. Nothing catastrophic, but people went to the exchange offices.
In March, the head of the National Bank Piotr Propokovich promised that the National Bank would not allow any devaluation. The people pushed up. At the end of March, the negative balance of currency purchase amounted to 700 million dollars. The authorities said about the unjustified frenzied demand for currency. Queues appeared near the exchange offices.
In April Lukashenko promised to end the crisis within a few days, "a week at the most". People moved from exchange offices to stores. After disruptions with currency, the country began to have disruptions with goods.
Lukashenko said that Russia promised to give him a $6 billion loan. Russia delicately remained silent in response. The dollar exchange rate on the black market exceeded the official rate of the National Bank by 25%. Lukashenko complained that there is no stability in the world.
The difference between the official rate and the black market rate has grown to 70%. In May, Lukashenko said that the financial and currency crisis was over, and full stability was ahead of us.
At the end of the fall, the authorities did what the economy had been hinting at all year. They released, but not completely, the ruble exchange rate, and together with it a number of prices. At the end of the year, inflation amounted to 108 percent. The dollar rose to 8600 Belarusian rubles from 3000 rubles at the beginning of the year.
The respite between crises was short-lived. Although the 2014/15 financial crisis was the only one that was actually caused by external circumstances. Although no one really canceled the blame of the Belarusian authorities for pumping cheap money into the economy and increasing its dependence on Russia.
But the immediate cause of the crisis was still the collapse of the Russian ruble due to falling oil prices and Western sanctions. Just a day later, Lukashenko promised that there would be no devaluation of the Belarusian ruble.
Citizens understood everything correctly and went to the exchange offices. The authorities introduced a commission on the purchase of foreign currency, as well as stopped fx trading on the over-the-counter market. The official rate was fixed at Br11900 per dollar. On the black market, it rose to 15 thousand.
The Belarusian ruble rate did not come to its senses at the beginning of the next year. In 2015, the dollar price rose to 18 thousand Belarusian rubles. Belarus was saved from a repeat of the collapse of 2011 by the new leadership of the National Bank. Appointed head of the National Bank on December 27, 2014, Pavel Kallaur managed to convince Lukashenko that it was time to stop experimenting with the foreign exchange market and common sense.
Price of the question
Belarus moved to a free exchange rate in the foreign exchange market. And it helped stabilize the exchange rate. However, Belarus had to pay dearly for its previous experiments and too high dependence on the Russian economy. Belarus' GDP shrank from $79 billion in 2014 to $48 billion in 2016. The growth of the Belarusian economy has resumed only since 2017.
By the way, at the end of last year the size of the Belarusian GDP amounted to $76 billion, having still not recovered compared to 2014.
If in 2014, when fluctuations of the Russian ruble caused the collapse of the Belarusian currency, the share of Russia in the Belarusian foreign trade amounted to 35-40%, now it has grown to 65%.
If in 2010 the authorities stimulated banks to issue cheap loans to enterprises, now the National Bank sets clear targets for how many loans each bank should issue.
If in 1998 the authorities used gold and foreign currency reserves to buy Russian bonds, now Lukashenko says that the gold and foreign currency reserves should be spent on high-yield investment projects.
Compared to the current system of price regulation, all previous price regulation in Belarus was a free market rampage.
"We will all have to pay for the fact that we have tolerated the untenable policy of the long bankrupt government for so long," said Lukashenko's election program.