Does Every Belarusian Spend 10% of the Salary on Support of State-owned Enterprises?

The World Bank told how to revive the Belarusian economy.

The World Bank has long voiced that Belarus needs structural economic reforms to accelerate economic growth.

- Today our position is slightly different: Belarus urgently needs structural economic reforms to avoid economic instability," Alex Kremer, the World Bank Country Manager for Belarus, wrote in the official blog of the bank.

The representative of the bank believes that the country put changes on the back burner. But it cannot last this way anymore, kp.by writes.

In his report, Alex Kremer admits that Belarus has succeeded in reducing poverty. But this success has been achieved through loans. Belarus spent more than it earned. Today it's more complex than ever to cover the gap between income and expenditures.

Loss-making state enterprises are still the main source for infusions from the budget. According to the IMF, in 2015 they amounted to 9.5% of GDP.

- In other words, a Belarusian shared 10 kopecks from each earned ruble to support state-owned enterprises," the World Bank Country Manager for Belarus writes.

Since then, support for state enterprises has been cut. At the same time, according to the National Bank, the credit liabilities of state-owned enterprises they are unlikely to repay now amount to 14% of GDP.

- Today, Belarusians pay about a fifth of the operating costs of heating. Low tariffs are obviously good for people. But there is the reverse: it increases the volume of borrowing of Belarus and means lack of funds for investment," Alex Kremer said.

The expert recalls the IMF forecasts: if the country does not receive compensation from Russia for the "tax manoeuvre", Belarus will have to seek $1.5 billion in 2021, while in 2022 this amount will grow up to $2 billion. According to forecasts, the national debt will grow from 55% of GDP to 70% in 2019 - 2023.

- It is likely that in 2020 - 2022 the Belarusian economy will undergo a significant adjustment to reduce the gap between expenditures and income. This adjustment will be either planned and structured, which is tough, or it will be spontaneous and destructive, which is worse," the chief representative of the World Bank assumes.

The key advice to stimulate the economy is the same: to reform viable state-owned enterprises, and to close down or privatise loss-making ones. The World Bank knows that it will result in unemployment growth and offers methods to support those who are dismissed. First, to simplify the legislation on microenterprises and self-employment so that people could start their own business. Second, to enhance social protection programmes.

- Even if the existing program of state targeted social assistance is expanded five times, it will cost only 0.1% of GDP (95 times less than the amount spent by Belarusians to support state-owned enterprises in 2015). It is equally necessary to ensure a proper program of assistance to the unemployed," Alex Kremer says.

It means more assistance to individuals

The World Bank recommends to raise tariffs for central heating, but keep poor families in mind. Earlier, experts called tariff rates growth by $5 a year to slow. It will be recalled that now Belarusians reimburse all costs, excluding heating and gas supply.

- We offer to abolish tax benefits and reduce subsidies for central heating. At that, it is vital to increase costs for non-cash housing subsidies so that the heating bills would not be a burden for a family budget. With the existing state support system, richer families receive more subsidies for heating than poorer families. Therefore, the program of subsidies for utility bills payment needs strengthening. It should aim at the less affluent families, and not at those who own a large number of square meters, the World Bank Country Manager for Belarus says.