Simple budgetary arithmetic
After last year’s shake-up, the economy is stabilising but changes are afoot…
By Anatoly Romanenko
This year, inflation has dropped 10-fold compared to the similar period of last year. The foreign trade balance is now positive, making the exchange rate of the Belarusian Rouble more foreseeable. People seem to be forgetting about the previous lack of foreign currency.
Economic stabilisation is the result of a severe policy adopted by the National Bank and the Government, which restricted internal demand and placed restrictions on budgetary expenditure (via emission). Some unpopular measures were necessary, including a temporarily ‘hold’ on raising salaries. As a result, inflation has been held within 2 percent per month on average. It should stand at 19-22 percent by the end of 2012, with consumer prices rising no more than 12 percent next year. “We forecast that, in 2013, the index of consumer prices shouldn’t exceed 12 percent — from December 2012 to December 2013,” notes Alexander Yaroshenko, Belarus’ Deputy Economic Minister.
He admits that it won’t be easy to achieve, since unpopular measures will be required, including greater public contribution towards utilities (35 percent of the actual cost); Belarusian tariffs will be moving towards Russian levels.
However, salaries may be raised for those working in the budgetary sphere. In 2012, these rose twice, with more corrections possible before the year’s end. “Incomes are rising,” states Maxim Yermalovich, Belarus’ Deputy Finance Minister. “Our task is to ensure 5 percent real growth in incomes.” He explains that, in future, the Belarusian Finance Ministry plans to be guided by three criteria: a balanced budget; preservation of salaries; and restoring public sector incomes (in the last three years, these have lagged behind private sector incomes).
Salary levels have long been a stumbling block among economists, who agree that it’s necessary to enhance standards of living by raising salaries to at least $500 a month (the average was less than $400 in early 2012) but differ in their opinion of how to achieve this.
It may seem an easy task to raise the average salary to 1,000 Euros per month, changing the scale of prices and shifting the social burden from the shoulders of the state to the public while maintaining a balanced economy. However, Chinese goods are competitive worldwide primarily due to the use of relatively cheap labour. A sharp rise in salaries in Belarus would lead to a rise in the core cost of producing goods, which could easily lead to a fall in export sales.
Various opinions are held, with the Government adhering to the position that salaries should rise only where labour efficiency increases, noting that this will preserve the equation of the state budget while restricting inflation. Boris Panshin, a professor at the Belarusian State University, tells us, “Salaries should stimulate workers to be more efficient.” He also believes that, to avoid a ‘brain drain’, attractive salaries must be offered to skilled workers. “It’s much easier to find investments, acquire new equipment and open a new plant than to find the necessary number of highly qualified personnel,” he explains.
Another approach stresses the need for structural economic reform across Belarus, determining key branches while expanding GDP and enhancing standards of living. Georgy Grits, Deputy Chairman of the Belarusian Scientific and Industrial Association, notes, “We need to reduce budgetary spending. However, it would be wrong to reduce financing in all areas simultaneously. To give a little to everyone is almost the same as not to give anything to anyone. We must drastically reduce the number of those receiving while enhancing the efficiency of use of budgetary funds.”