Lukashenko offers to release political prisoners to resume a dialogue with the West
At a press conference for the Belarusian national and regional media on 17 June President Lukashenko declared his readiness to release political prisoners, provided the amnesty procedures were observed.
Belarusian President proposed to the West to bargain for “political prisoners in exchange for the resumption of relations”. First of all, Lukashenko is prepared to restore a dialogue with Poland by mentioning the leading role of Poland in the Eastern Europe.
Bearing in mind it is the second proposal of Lukashenko in the course of the past two weeks (reference to the meeting of judges on 3 June) the Belarusian leadership is doing its best to avoid economic reforms. The main recipients of these statements are member states of the IMF, its mission worked in Minsk on 1-13 June.
Given the lack of positive result of the IMF mission and that the conditions put forward for Belarus are not feasible and detrimental to the “created” welfare state and to the popularity of the President, the Belarusian authorities are trying to get away from implementing economic reforms and try to resolve the crisis with “small blood”: by releasing political prisoners. This option suits Minsk perfectly it has been tested in the summer of 2008, when a former Presidential candidate Alexander Kozulin and other political prisoners were released.
The rapid increase in wages has led to a decline in the ratio between labour productivity and real wages to one. Previously, the rule was that enterprises, in which the state owned more than 50% of shares in the founding capital, were not allowed increasing salaries if this ratio was equal to or less than one. The authorities are unlikely to be able to meet the wage growth requirement without long-term consequences for the economy. Hence, the government is likely to contain wage growth for the sake of economic growth.
According to Belstat, In January – August 2017, GDP growth was 1.6%. The economic revival has led to an increase in wages. In August, the average monthly wage was BYN 844.4 or USD 435, i.e. grew by 6.6% since early 2017, adjusted for inflation. This has reduced the ratio between labour productivity and real wages from 1.03 in January 2017 to 1 in the first seven months of 2017. This parameter should not be less than 1, otherwise, the economy starts accumulating imbalances.
The need for faster growth in labour productivity over wage growth was stated in Decree No 744 of July 31st, 2014. The decree enabled wages growth at state organizations and organizations with more than 50% of state-owned shares only if the ratio between growth in labour productivity and wages was higher than 1. Taking into account the state's share in the economy, this rule has had impact on most of the country's key enterprises. In 2013 -2014 wages grew rapidly, which resulted in devaluation in 2014-2015.
Faster wage growth as compared with growth in labour productivity carries a number of risks. Enterprises increase cost of wages, which subsequently leads to a decrease in the competitiveness of products on the domestic and foreign markets. In construction, wholesale, retail trade, and some other industries the growth rate of prime cost in 2017 outpaces the dynamics of revenue growth. This is likely to lead to a decrease in profits and a decrease in investments for further development. Amid wage growth, the population is likely to increase import consumption and reduce currency sales, which would reduce the National Bank's ability to repay foreign and domestic liabilities.
The Belarusian government is facing a dilemma – either to comply with the president’s requirement of a BYN 1000 monthly wage, which could lead to new economic imbalances and could further affect the national currency value, or to suspend the wage growth in order to retain the achieved economic results. That said, the first option bears a greater number of negative consequences for the nomenclature.
Overall, the rapid growth in wages no longer corresponds the pace of economic development. The government is likely to retain the economic growth and retrain further growth in wages. Staff reshuffles are unlikely to follow the failure to meet the wage growth requirement.