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Minsk about new financial crisis, which could be triggered by Russia's expected tax manoeuvre.
According to the Belarusian finance ministry, the country’s budget revenue losses from Russia’s tax manoeuvre in
"You are right, but our main trading partner is not Germany but Russia, and it is important to us that there are equal conditions, primarily in Belarus and brotherly Russia," Lukashenko fired back immediately, adding that Belarus advo- cates the comprehensive and uncondi-
'Plan B'
In November, the International Mon- etary Fund (IMF) warned the Belarusian government to prepare "contingency plans" if energy negotiations with Russia fail. "Although the government sees
a low probability of less than full com- pensation for the tax manoeuvre losses, contingency plans would be helpful if such an event were to materialise," the IMF said in a statement.
According to the multinational lender, in such an event, oil-refining activity would be reduced, dampening export revenue and growth. Tax revenues would also
be hit due to lower economic activity, lower transfers from Russia, and lower customs duties.
The policy response should aim to mitigate the impact on the balance of payments and facilitate the reallocation of resources in the economy, including structural reforms. "The loss of energy discounts would underscore the need for faster and deeper reform to boost productivity in SOEs, not least in the refineries," the statement reads.
Meanwhile, the IMF believes that exchange rate flexibility to allow the needed adjustment in the balance of payments, supported by fiscal discipline to refrain from untargeted and costly subsidies to the refineries, and with additional measures as needed to maintain debt in a downward trajectory.
At the top of that, tighter monetary policy to maintain inflation within target and limit undue volatility in the foreign exchange market, the multinational lender added.
“International Monetary Fund (IMF) warned the Belarusian government to prepare "contingency plans" if energy negotiations with Russia fail”
2019 alone were estimated at BYN600mn ($300mn), and that the losses might total $2bn by the end of 2024.
On December 8, a spokesperson with Belarusian President Alexander Lukash- enko said in a televised interview that Minsk already lost $3.6bn due to Rus- sia's cut of energy subsidies to Belarus. Due to Moscow's 'tax manoeuvre' Belar- us will lose extra $11bn within the next four years, the spokesperson added.
Belarus’ foreign exchange reserves increased by $181.3mn, or 2.6% month-on-month, to $7.108bn in October. However, significant parts of the reserves were created by bonds issued by the National Bank of Belarus (NBB), which the regulator should repay within the next 12 months. The bondholders of these notes are local commercial banks.
"Our main trading partner is not Germany, Mr Putin"
On December 6, a bitter dispute broke out between Lukashenko and his Rus- sian counterpart Vladimir Putin during an EEU summit in Saint Petersburg.
"I draw attention to the fact that today the price is $129 per 1,000 cubic meters for Belarus and will be $127 next year, while it is $250 for Germany," Putin said during the event. "This is certainly a great advantage for our allies within the EEU, although we should definitely try to make prices completely the same. But this requires time and a different degree of integration between our countries, which is a subject of negotiations."
tional fulfilment of obligations by all the EEU member countries, according to BelaPAN news agency.
Lukashenko underlined that an agree- ment had been reached to create single markets of natural gas, oil and petro- leum products within the EEU by 2025.
"We made this decision and we have to do everything within the set timeframe and ensure that there are stable and fair conditions in the fuel and energy sectors within the EEU," he said. "There are no interests of suppliers and consumers
of energy resources in allied relations. There is an integral system – the Eur- asian Economic Union."
He said that he completely agreed with the Russian president that it was neces- sary to develop new areas of coopera- tion, including in the fields of nuclear power and renewable sources of energy. "But the lack of consensus on principles for creating a single market of oil and gas does not allow the EEU to progress at a faster pace," Lukashenko added.
Find more Eastern Europe content at www.bne.eu/eastern-europe
Selected headlines from past month:
· Putin press conference: A man with a plan for 2019
· IMF board of directors signs off on Ukraine’s $3.9bn stand-by agreement · Average bribe in Russia for 2018 is $9,000
· Ukraine's government to refuse to reinstate Nasirov
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