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Barys Zhaliba: Inflation in Belarus Is Galloping Again

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Barys Zhaliba: Inflation in Belarus Is Galloping Again
Barys Zhaliba

Price regulation ended up badly for him.

Inflation in our country is galloping again. The price of almost everything rises - from vodka and housing and communal services to medicines. By December, the rise in consumer prices on an annualized basis spun up to 6.6 percent. There has not been such high inflation in Belarus for 45 months, since February 2017, Doctor of Economics Barys Zhaliba writes in an article for Narodnaya Volya.

But, as the song says, there will be more! Prime Minister Raman Halouchanka proposed "to consider any single-digit figure (that is, inflation less than 10 percent) as a good result." No time for "fat." The main thing is to cope with the political crisis. In order to relieve social tension, the authorities decided to reintroduce administrative methods in full to contain prices. For this, they have the Ministry of Antimonopoly Regulation and Trade (MART).

In previous years, price controls in the country weakened as inflation slowed down. The ministry could introduce temporary (up to 90 days) control over prices for socially important goods. For example, at the end of March, commercial businesses were instructed not to raise prices by more than 0.5 percent a month. But sometimes regulated prices rose faster than market prices. So, from January 1, in addition to standard inflation indexations, additional growth in prices for medicines, medical devices, and other "preferential" goods is expected. According to the Republican Union of Industrialists and Entrepreneurs and the Belarusian Scientific and Industrial Association, the authorities approved amendments, according to which, from January 1, the VAT exemption on medicines and medical products is canceled, and the list of privileged goods is revised. Naturally, the full VAT rate will raise the price of goods. Excise taxes will increase in prices for tobacco products, the land tax rate for shopping centers will increase, a fee for crossing the border of Belarus by light vehicles will be introduced, and much more.

Given that the ruble has depreciated against the dollar by at least 20 percent since the beginning of the year, Belarusian business will be hostile to administrative pricing. As is known, any directive price restrictions reduce the profits of manufacturers and trade organizations, which are the main source of their development. And sometimes, these restrictions generally drive enterprises into losses. So, there is information that government agencies are preparing a decision to expand the list of socially significant goods, the prices of which, of course, are regulated by the antimonopoly ministry. One of the proposals is being discussed to expand this list, which usually consists of food items, at the expense of popular industrial products. Lukashenka supported the idea, saying: "Who said that a refrigerator and a washing machine are not important goods for the population? Therefore, it is necessary once and for all to develop a containment mechanism in all areas and parameters. Otherwise, it turns out that we are holding back the peasants (mainly this is a matter of food and clothing), and the rest of us are freemen."

As the previous practice of price caps shows, expanding the range of socially significant goods is a sure sign of population impoverishment. In addition, in the regulatory fervor, one can reach the circle of other excisable goods, in which today alcohol and tobacco products, motor fuel. For example, add excise taxes to the prices of jewelry, furs, black and red caviar, and even cars. All this we once passed in the "dashing nineties." Administrative regulation of prices ultimately leads to a total shortage of goods, which is well known to the older generation from the times of the Soviet economy, when people asked each other not where to buy, but where to get it?

When producers go broke, businesses shut down, competition is curtailed, taxes rise and new payments are introduced, all this falls on costs and increases prices. The state must regulate the prices of products and services of enterprises of monopolists since it allows this monopoly. If it wants to support the poor, then there are targeted payments to people who will decide for themselves how to spend them. But, apparently, next year, in the area of price control, instead of liberalization, one should expect only tightening. Due to the unresolved political crisis, the Belarusian business is already in limbo. Therefore, attempts by the state to regulate prices everywhere will become an additional obstacle to the development of the economy and will throw it back.

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