Belarus has abolished the position of IMF Resident Representative
Following the World Bank, the IMF also minimizes cooperation with Belarus. This decision is explained by the fact that the Fund does not see any prospects in Belarus in terms of structural reforms in the economy. This means that Belarus will be under constant pressure of external financing gap, and the fragile macroeconomic equilibrium, available now, will be broken by the middle of the year because of attempts to increase revenue and accelerate the growth of GDP.
In early April, the IMF Resident Representative in Belarus, Natalia Kolyadina will receive a new assignment in the structures of the IMF. Along with the new appointment of Kolyadina the IMF eliminates the position of the Resident Representative in Belarus.
In spite of the ongoing rhetoric for years about the resumption of the cooperation program, the authorities of Belarus and the IMF have completely different ideas about what, how and at what speed it should be done. Moreover, the steady course of the country authorities to 5% GDP growth, higher wages, more and more intervention in the pricing – it all goes sharply at odds with the views of the IMF on how to recover from the crisis of 2011.
Revelations of the Chairman of the National Bank of Belarus N. Ermakova on January 30 certainly influenced the final decision on the futility of the IMF’s efforts. Ermakova said that Belarus hopes to negotiate with the IMF on a new loan in an amount sufficient to refinance the first loan, which repayment the country should begin this year. \\"Our proposal for negotiations with the IMF - a loan in an amount sufficient to refinance the first loan fund of 3.4 billion U.S. dollars\\", - said the head of the National Bank of Belarus Nadezhda Ermakova. d
Total debt to the IMF with interest now stands at 3.8 billion U.S. dollars.
In total, Belarus has to pay about $ 8 billion in 2013-2015, and $ 6 billion - in 2013-2014. At that payment in 2012 will amount to 1.63 billion dollars, including 563 million dollars for a partial repayment of the IMF loan, 122 million for maintenance of state credit of Venezuela ($ 500 million, involved in December 2008 for a term of 7 years) and 441 million dollars to service its Eurobonds along with servicing and repayment at the end of 2012 two-year bonds at RUB 7 billion, placed in the Russian Federation in late 2010. In addition to stand-by credit of the IMF in the amount of $ 3.6 billion, Belarus will pay its first Eurobond issue ($ 1 billion) in 2015. Thus, if Belarus can still pass 2012 relatively painless for its gold reserves, the payments in 2013-2014 will not be such.
It should be noted that the International Monetary Fund traditional review mission will work in Minsk from February 22 to March 6 in the framework of Article IV of the IMF charter, i. e. will be held the traditional annual review of the situation in the economy, which is conducted in all member countries of the IMF. In addition, the mission will hold a second post-program monitoring, and, in particular, the audit of the macroeconomic forecast for Belarus in 2012.
But, of course, in addition to the technical routine, all the talk one way or another will be built around the possibility of signing a new loan program. It is quite possible that the country authorities claim in the margins that there is no money to pay off the old debt, despite the public rhetoric about the sufficiency of funds. At the same time, the sanest representatives of the state apparatus understand the low prospects of success of this kind of blackmail, as well as a new loan on the conditions of Belarus.
The situation can be changed through a comprehensive program of reform. However, domestic and foreign observers are content with empty rhetoric so far, which is immediately divided on the concrete steps of the government or the statements of other actors. Thus, M. Myasnikovich has recently said that it is needed to revise the frozen state programs, and evaluate their effectiveness again, as well as restore lending to the public sector. Makei in his working trip to Baranovichi announced the upcoming regulations to tighten pricing, which in his opinion, will contribute to lower prices and inflation.
Taking into account these and other statements, it is clear that 1)it is extremely difficult to attract FDI in the current economic situation in Belarus and the plan for their involvement will not be fulfilled; 2)it will be difficult to find facts for international investment and rating agencies that will help them review the sovereign ratings of the country; 3) the IMF will continue to observe and monitor at the same time, continuing sluggish negotiations on a new program; 4) the country authorities will be under constant pressure of external financing gap; 5) the fragile macroeconomic equilibrium, currently available, will be broken by mid-year by trying to increase revenue and accelerate growth in GDP%; 6) Belarus will return to the serious and responsible discussion and negotiations with the IMF on a new program in 2013.
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.