The government starts dealing with arrears

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April 22, 2016 17:57

“Belneftehim” restricted supply of its subordinate enterprises to foreign enterprises-debtors. This decision was adopted at a meeting of the Board of the Group on 29 July 2011.

Reports say, Belarusian exporters’ receivables exceeded $ 4 billion, of which $ 2 billion accounted for arrears.

Comment

The main volume of foreign currency earnings, which stays unreasonably outside Belarus, is accountable for the Ministry of Industry enterprises and the concern “Belneftekhim”. All together they are responsible for about 70% of the Belarusian exports. The reasons behind the delayed return of foreign currency earnings are not only due to unattractive official exchange rate, but also to the possibility to make quick gains using financial institutions abroad. While struggling to increase the foreign currency earnings the authorities still adhere to the usual administrative methods. The intrigue is that unofficial repost say, the State Control Committee, the main oversight body of the country, informally does not support the current economic policy. SCC experts were both against the unwinding of extensive loans and income growth at the end of 2010, as well as against the current policy of multiple exchange rates. Without full and unconditional support of the SCC, any repressive attempts would be ineffective.

Accordingly, prognosis for the future is that the number of corruption schemes will increase, there will be little progress on the return of currency earnings (by large state-owned enterprises), and continuation of fights behind the scenes between different power groups for a way out of the crisis in the country.

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Growth in real wages may disrupt macroeconomic balance in Belarus
October 02, 2017 12:12
Фото: Дмитрий Брушко, TUT.BY

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.

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