Barys Zhaliba: Pegging fuel price to dollar to boost inflation

The authorities have found how to continue replenishing the state budget amid falling oil prices.

Belneftekhim pegged the petrol price to the dollar rate today. Economist Barys Zhaliba tells charter97.org what it will mean for consumers, how the fuel price will grow in the near future and what consequences Belarusian economy may face.

– It is a trick of Belneftekhim concern. The government set a strategic task: Belarusian and Russian prices of main commodity groups should be equal. We see it well on the example of oil products. The prices became equal (prices in Russian regions differ, too). Moreover, if we look at the European part, our prices of petrol AI-92 and AI-95 are higher. We usually compare prices with those in the neighbouring Smolensk region. Belneftekhim fulfilled this task of the authorities.

– What other tricks do the authorities have to replenish the budget at the cost of ordinary citizens?

– Car fuel is excisable, everyone knows it. Prices of such goods include a big excise duty that goes to the budget. We have always had problems with the state budget, they've just become acute today. The government looks for quick revenues. The decision on tax income for the next year is practically made: it will be increased 1% under the guise that the additional revenues will be spent on families with many children. But we have calculated that they will receive only a small part of it, if any. There are plans to raise VAT from 20% to 22%. As for taxes, we do not want to achieve the level of tax rates in Russia. On the contrary, we are moving in the opposite direction. Our VAT was equal to Russian one, 18%. Now it is 20% and will grow to 22% tomorrow. Speaking about prices, we are replenishing the budget with a high speed. Whom do we have to rob? Car owners are wealthy people, so they are the first [to be robbed]. So, fuel prices are growing.

They say we need to raise factory prices, because raw materials grew in price. But oil is getting cheaper, including Russian Urals oil. It costs about $100 or less per barrel today. Inflation is not an explanation in this case. It seems that prices should be decreased or at least not raised. But the authorities decided they should be pegged to the dollar, because the Belarusian ruble is falling steadily.

– How many times will petrol increase in price this year?

– I think we'll definitely see one more increase.

– Will prices of other goods grow due to the fuel prices increase?

– Of course. Petrol is transport and transport services. Most companies use them. Products of plants will rise in price too, because their prices include costs of raw materials transportation. We'll face a new spiral of inflation. It always happens when car fuel prices grow.

– Pegging fuel prices to the dollar will only make the inflation rate even higher, won't it?

– You are absolutely right. All prices will start growing gradually.

Today's increase in fuel prices has become the third one in 2014. Petrol prices were previously raised at the beginning of summer.