17 June 2021, Thursday, 21:19
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Former Head Of National Bank Of Belarus On "Freezing" Prices: This Is Bad Sign

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Former Head Of National Bank Of Belarus On "Freezing" Prices: This Is Bad Sign
STANISLAU BAHDANKEVICH

What will Bolshevik methods lead to in the economy?

Strict regulation of prices for all basic foodstuffs is introduced in Belarus. Earlier, the authorities had "frozen" the prices of some consumer goods and medicines.

Why did they have to resort to such extreme measures? Charter97.org talked about it with former head of the National Bank of Belarus Stanislau Bahdankevich.

- The reason for this is the philosophy, professed by the authorities - the old, Bolshevik and communist style, according to which everything must be regulated by the state, so despite all the negative experiences in Belarus, they are back to full administrative control.

We saw that happen when Lukashenka came to power. The first Prime Minister Mikhail Chyhir tried to bring back to normal the average prices of foodstuffs, bread and milk first of all. Lukashenka ordered to set the prices of these products so that the costs exceeded them.

Lukashenka is trying to bring back to memory the Soviet Union, that system of economy and administrative price management. It's not all manual control yet, but it's close.

All this will lead to a deficit of certain goods on the market, to distortions in the finances of producers, enterprises, and so on. But this is his Bolshevik philosophy: everything must be governed by the state, so he is against private businesses, against market formations, he was forced to allow them to a certain extent, but given the problems in the economy, which have appeared in full force, he is bearing down on them again.

Lukashenka is trying to solve the problems through administrative and manual price-fixing because of the U.S. sanctions. This will not lead to anything good. This is a very bad sign. If this was done, maybe, for a week, half a month, a month, to calm down the market, that would be all right, but he does it deliberately.

- What are the reasons for such a growth in inflation? Why can't the authorities take control over it?

- I wouldn't say that inflation is very high today. The overall inflation rate is about 9%, which is a low level for Belarus. We've never had 3-5%, inflation has always been higher, but you have to consider that wages and pensions are not growing, so the people are getting poorer. So he is trying to stop the impoverishment by keeping prices down.

The average price stability is more or less the merit of the National Bank, which tries to limit the growth of the so-called broad money supply. During the last five months it grew by 0.3%, although there was a possibility of growth up to 10%. It turns out that the National Bank is still firmly in control of the money supply. In addition, the money supply has actually decreased because people have taken deposits from banks. We have a huge reduction in the number of deposits, especially foreign currency deposits, we can say - by billions of dollars. Since the mass is decreasing, the population has less money, therefore, it limits the growth of prices. Even the goods that we have today - they can no longer be sold, given that the entities of economic business and the population do not have enough money.

The population does not trust the dictatorial regime which exists in Belarus. People do not trust the National Bank, even if its policy is more or less correct, people do not trust the illegitimate authorities, which is why there is an outflow of deposits and a reduction in the broad money supply, thus supporting the prices in a certain way.

They are growing, but would be 2-3 times higher if there was no reduction in the money supply, that is, people and businesses have no money. The economy is not growing. If it grew with the help of loans, the money supply would increase, but that is not happening.

People don't want to see this regime, and there is a growing distrust of the authorities that have not been elected by the people. Moreover, the low level of qualification among the authorities and methods of economic management, an attempt to do everything administratively, proclaim themselves. In the end we have what we have.

- Are the measures to freeze food prices effective?

- I've already told you that the experience of the authorities and the Republic of Belarus in general shows that administrative intervention in the formation of market prices is ineffective. It's extremely inefficient. For a while, for a month or two, it might be acceptable, but in the long run it's a coffin for the economy. It is detrimental to its development and will not lead to anything good. The prices will rise anyway, but, of course, they will rise because the money supply will go up. The money supply will grow because Lukashenka will want to revive the economy, which is dying out.

- What diagnosis can be given to the economy on the basis of these symptoms?

- We are witnessing the stagnation of economy. It hasn't been developing properly for a long time, although there have been breakthroughs in certain sectors. The machine industry, machine-tool manufacture and so on - there is no growth, the cement and metallurgical industries are unprofitable.