Foreign trade and debt

The structure of foreign trade, in terms of commodities and markets, has not undergone dramatic changes during the transition period.

Belarus’ trade integration is traditionally over-biased towards Russia: 60 per cent of Belarusian foreign trade operations are connected with Russia.

The main exports are transport and vehicles (to CIS and non-CIS areas), chemicals and mineral products (mostly for non-CIS countries), and machines and equipment (mostly to CIS countries).

The main imports are mineral products (mostly from CIS), machines, equipment and machine parts, chemical products, food products and non-precious metals (from CIS and non-CIS countries). Belarus’ trade balance in 2012.

Throughout the past decade growing exports were offset by imports, principally on trade with Russia, as a result of Belarus’ dependence upon imported energy sources and minerals.

 The crisis of 2008-2009 led to a sharp drop in exports, and was exacerbated, first, by reduced subsidies on oil and gas exported by Russia to Belarus and, second, by high wage indexation. This policy gradually increased the current account deficit (15 per cent of GDP in 2010), extinguishing the currency reserves.

The fragility of Belarus’ external position is exacerbated by the financing structure of the current account with negligible FDI and a large share of debt-creating inflows.

Until recently, Belarus had one of the lowest external debt among transition countries. However, the recent need to finance the growing current account deficit relies on significant foreign borrowing: the external debt experienced a nearly fourfold increase from 17 per cent in 2005 to 72 per cent of GDP in 2011.

The heavy and increasing burden of the external debt (according to IMF, Belarus’ external debt will be almost 80 per cent of the GDP in 2016) narrows the scope for Belarus’ economic growth.

Together with Russia and Kazakhstan, Belarus is a member of the Customs Union. Tariff and non-tariff barriers are largely eliminated in the trade between the countries concerned, and many administrative formalities on the borders have been abolished in recent years.

In 2011, the heads of Belarus, Russia and Ukraine signed a Declaration, which codifies the move towards the Common Economic Space (CES) and the intention to create the Eurasian Union by 2015. Several basic agreements of the CES have come into force in 2012.

The goals of the CES include: (a) to develop common goods, services, capital and labour markets; (b) to promote structural reforms; (c) to ensure greater coordination of fiscal, monetary, exchange rate policies, customs and tariff policies; (d) to create common mechanisms of targeted government support to the economy.