Crisis Response Policies in Russia, Ukraine, Kazakhstan and Belarus – Stock-Taking and Comparative Assessment

This study focuses on comparing and assessing the policy measures Russia, Ukraine, Kazakhstan and Belarus took in response to the impact of the U.S. subprime crisis (2007) and of the Great Recession (2008–2009). Being most dependent on cross-border capital inflows, Kazakhstan was most affected by, and reacted most intensively to, the subprime turmoil, followed by Russia. In contrast, all four countries responded to the second crisis with a panoply of fiscal, monetary, exchange rate and other measures. After sharp across-the-board devaluations in late 2008 and early 2009, and accompanying the recovery of the oil price, the currencies of the oil exporters Russia and Kazakhstan soon stabilized, whereas the currencies of the oil importers Ukraine and Belarus stayed under pressure – giving rise to intermittent interventions. Opposing – if hitherto successful – macrofinancial restabilization strategies have been conducted: Oil exporters employed their oil stabilization funds to deliver generous fiscal stimuli, whereas oil importers took recourse to IMF Stand-By Arrangements and exchange controls. With respect to the banking turmoil and restructuring since late 2007, the following can be concluded: Although measuring recapitalization costs is not unproblematic, systems dominated by state-owned banks (Russia, Belarus) appear to have fared better in precisely this time span in the sense that they have incurred less crisis-triggered recapitalization spending than systems dominated by private domestic or even foreign-owned capital (Kazakhstan, Ukraine). One of the reasons that might explain this result is the (with hindsight) excessive pre-crisis credit booms in the privately dominated banking systems, financed largely from abroad, coupled with the possibly even weaker rule of law outside the sphere of direct state control in the CIS region.