Economist: Prices in Belarus Will Soon Jump like on Springs

The budget deficit has become a record, civil servants in entire departments are being laid off.

Recently, a large number of various goods have been banned in Belarus. Thus, fish, canned food, juices, and baby food from some manufacturers were banned for sale. Charter97.org spoke with Doctor of Economics Barys Zhaliba about the situation in trade and how it affects the country's economy and image:

- Of course, all this has a negative effect. At one time, we were outraged – and rightly so - when Russia imposed an embargo on meat and dairy products of Belarusian producers. Such bans only impoverish the shelves of our stores.

There are well-reasoned bans, services find some kind of bacteria, and so on, but there are not well-reasoned bans, where politics is involved. In particular, the fact that the Rosselkhoznadzor imposed an embargo on the supply of our products to Russia is explained by politics. If our government did something wrong in relation to Russia, then immediately the sanctions were strengthened, then they were canceled. It is possible that the Belarusian government somehow wants to influence suppliers from some countries. This does not mean anything good for the population.

- How do foreign companies and international investors react to such measures of the authorities?

- The reaction is definitely bad. If a country exports something to our market, then it hopes that the goods will be delivered and paid for. With the appearance of obstacles, the exporter is looking for other markets. Here both sides lose - both the exporter and the importer.

- Two months ago in Belarus, in order to slow down inflation, the authorities froze prices for more than 100 goods. And the prices of food and many goods continue to rise. Why is this happening?

- Yes, we have introduced a ban so that monthly growth does not exceed 0.2%. The trade responds accordingly. The state pricing authorities, represented by MART, hold back the prices of products, so trade raises markups on other goods that are free from this prohibition. Perhaps, this makes life easier for the most socially unprotected segments of the population who are trying to buy these goods at a cheaper price, and their salary does not allow for a wider assortment. However, people whose salary allows them to buy more only lose out. It turns out that the population as a whole loses.

The current situation with trade is sad, its profitability is literally 1-2%. Manufacturers' prices are not frozen, so they raise prices in line with inflation, but trade can only raise prices by 0.2%. Of course, this is very small, hence, there is low profitability of the trade. Recently, you can see that retail chains are going bankrupt, for example, recently it was Bigs. Stores are closed, and these areas are transferred to more successful retail chains, such as Euroopt. Trade suffers, as they say, today there is no "excess fat."

- In MART, they already say that it is time to cancel decree No. 100 on freezing food prices. What happens when prices can no longer be held back?

- Naturally, prices will jump. They were held like springs, so they will straighten and grow. Such a reaction can be expected.

- In the first months of 2021, the budget deficit became the strongest since the 1990s. What can such an excess of government spending over revenues lead to?

- Now the deficit is really a record for the entire existence of independent Belarus. In my opinion, we have a budget deficit of 4.5% of GDP, while the international norm is no more than 3%. We already hear that there are layoffs, even among the bureaucracy, they almost entire departments are being laid off. The authorities are trying to save on expenses, and there is still the repayment of the state debt, which is increasing, especially the domestic one. This is all due to the shortfall in taxes. Belstat shows us that GDP increased by 0.9% in the first quarter, but this increase does not correspond to the budget revenues in any way.

- Departure from the country by private car has become paid in Belarus since May 1. How do you assess this decision of the authorities? What else can become paid in the country?

- There is such an expression - "to search the trunk." So, the state begins "to search the trunk," where and thanks to what it can replenish the budget. They came up with the idea that now when you go abroad you have to pay. At one time, Lukashenka said that everyone who travels abroad should pay $ 100. Naturally, the public was outraged, and they did not do this. Now they are returning to this idea, of course, this is not $ 100, but, as they say, the main thing is to start. The Ministry of Finance will continue to look for opportunities to impose some other taxes on both enterprises and, to a large extent, the population. We should start preparing for this.

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