Our independence began with the All-Union Referendum on the preservation of the USSR, the Novo Ogarevo process of establishing a new CIS, an August coup d-etat, Mikhail Gorbachev’s dismissal, money reform, extreme inflation, empty shops and lack of commodities. Belarusians suffered all manner of hardships and the ancient Chinese proverb ‘God forbid one should be born in an age of changes’ became a favourite joke. In the past two decades however, we’ve managed to cope with all these problems and those who remember the beginning of the ‘boisterous 1990s’ view our present economic difficulties with a smile.Our independence began with the All-Union Referendum on the preservation of the USSR, the Novo Ogarevo process of establishing a new CIS, an August coup d-etat, Mikhail Gorbachev’s dismissal, money reform, extreme inflation, empty shops and lack of commodities. Belarusians suffered all manner of hardships and the ancient Chinese proverb ‘God forbid one should be born in an age of changes’ became a favourite joke. In the past two decades however, we’ve managed to cope with all these problems and those who remember the beginning of the ‘boisterous 1990s’ view our present economic difficulties with a smile.
On the dawn of our independence, many problems existed. On January 1st, 1991, the USSR introduced a 5 percent sales tax and two weeks later sudden money reform was announced (later known as Pavlovskaya after Finance Minister Pavlov). As a backlash against false banknotes, 50 and 100 Rouble notes (issued in 1961) were taken out of circulation or exchanged for new 50 and 100 Rouble notes. There were only three days allowed for people to exchange their money (a maximum of 1,000 Roubles). The reform was announced on January 22nd late at night, three hours before its launch. Most quick-witted people used those three hours to exchange their savings in metro stations and railway stations or make money transfers at some postal offices that were open until midnight. Some also hurried to the airport to buy expensive tickets and, after the exchange campaign closed, returned them in exchange for new banknotes.
After this initial shock, new prices were set in early April: they were three times higher than the previously ones. By the time of the USSR collapse, people’s confidence was at an extremely low level. The consumer market was also experiencing a crisis, with citizens receiving the so-called ‘calling cards of consumers to buy industrial products’ and special coupons to buy food. Devaluation became the most severe problem.
During the period, the so-called ‘zaichiki’ (hare) banknotes were put into circulation. These had hares and other animals such as squirrels and wolves depicted on them. In actual fact, our first money was not money at all but coupons for payment. People needed to receive their salaries but we lacked Soviet money to pay them,” recollects the Head of the Economic Theory Department at the Academy of Public Administration under the aegis of the President of Belarus, Irina Novikova.
The figures from those years are truly impressive: from 1992-1995, the money stock rose by over 300 percent, with inflation in Belarus reaching up to 30 percent monthly. In addition, commodity deficiency was widespread, with huge queues in shops being normal. In 1992, price liberalisation was announced in the country but, nevertheless, prices still rose 16.6 times in a year. The present (double-digit) inflation seems strange against that background. The situation changed in 1994 only when the National Bank’s programme of urgent measures to take the country out of the crisis was adopted. Emission volumes were cut and, in late 1994, the refinancing rate was increased to 480 percent. The National Bank began pursuing a monetary-credit policy traditional for modern capitalist countries. Apart from monetary problems, production collapse has been registered since 1992. The Economy Ministry informs us that, in the first five years of the 1990s, GDP fell by 38 percent. Industrial production was cut by 41 percent and capital investment decreased by 60 percent. Under the conditions of free pricing, Belarus’ economic situation was complicated by fuel, energy, metal and raw material supplies from Russia, Ukraine and Central Asia. Prices on these were steadily growing, causing continuous rises in the cost of goods and services. Sales of domestically produced manufacturing faced problems as a result. Agriculture was also experiencing difficulties: its production fell by almost 30 percent. Cattle stock was decreasing and Belarusian farms were in poor condition. At the same time, procurement prices on agricultural produce were controlled — remaining low; they failed to cover all the costs necessary for production.
“In the early 1990s, there was no sense of developing production: our machinery was not in demand abroad and a gap was created with the industrial co-operation with the other former Soviet republics,” Ms. Novikova explains. “In 1994, the President promised our nation would revive its industry and all previous ties. At that time, this was a truly serious statement. As we have seen, all pre-election promises were kept: we’ve not merely revived our industry but developed it. This promise was fully achieved by 2000.”
According to the statistical figures, gradual economic growth was registered in Belarus since 1996 when the 1st All-Belarusian People’s Assembly approved the major avenues of the country’s social-economic development for 1996-2000. During that five-year period, our GDP rose by 35.7 percent, industrial production increased by 64.4 percent and injections into the main capital rose by 33.2 percent. More accommodation was built (by 81.1 percent) and people’s real monetary revenue almost doubled. By 2000, the pre-crisis 1990 figures were overtaken regarding the volume of industrial production and manufacturing of consumer goods. The Economy Ministry believes that the country’s social-economic development proves the wisdom of this economic model.
“It’s pointless to compare our present wellbeing with that registered in the first years of our independence: it has risen many times,” Ms. Novikova says. “This refers to the level of people’s earnings and the number of material assets. Cars are the best example of the latter. You can compare the car fleet of the past and the present. Moreover, the situation is truly much better regarding the parity of consumer ability. At present, a Belarusian can buy many more goods and services than they were able to around 25 years ago.”
By Alexander Benkovsky
