Former Head Of National Bank Of Belarus: Authorities Conceal Real Inflation In Country

We are waiting for a jump in prices and the dollar rate.

Belarusians every day feel the inflation, which in our country has broken a five-year record. Separate goods, as journalists considered, have risen in price even by 180%.

Former head of the National Bank of Belarus Stanislau Bahdankevich told Charter97.org the reason for this.

The reason is the state of the economy. I mean, there's not just one reason for this. There are a number of factors that affect the stability of the economy. These are big problems with bad loans. The money went to some events, but they turned out to be ineffective and did not pay off. We have formed an excess money supply, and this always leads to higher prices.

This is also due to errors in foreign and domestic trade. I just read that the share of domestic goods in our trade turnover turned out to be the lowest in the last ten years or more. Our products turn out to be inefficient, of lower quality than imported ones. This also had an impact, as did a lot of other things.

— Last year, the authorities tried to hide the real significance of inflation. Why do you think the National Bank and Belstat resorted to such frauds?

— I think that even now this inflation is not 10 percent. This is a political component: it is necessary to show that Belarus “continues to stand unbendingly” under the sanctions, to show that “our government is the smartest and most effective”, that “we don’t need democracy”, that “we need a repressive totalitarian regime”, that “with everything is stable under this regime”.

If we talk about those indicators that affect inflation, then this is the growth of broad money supply. Over the past year, our broad money supply has increased by 6.6 percent, that is, it is not that big, but among this broad money supply, our ruble money supply has grown several times. This means that miscalculations were made somewhere, they invested in rubles. Rubles were invested in the economy, but it did not give a return, did not give a return. And it affected inflation too. We have a lot of factors in the aggregate, including the rise in prices. And the price increase is not 10% in reality, but at least 15%.

And why are they lowering it? Maybe there is something wrong with the methodology itself. Already when I was there, our people did internships in the West, back in the 90s the methodology was studied. But it must be used wisely. Perhaps the wrong goods are taken, which leads to a distortion of the market. We see an increase in prices for literally all consumer goods in our country, they are much higher than 10% per year. That is, inflation is even higher. And why it is underestimated is the policy of the totalitarian government headed by Lukashenka.

— Recently it became known that the authorities froze the prices of a number of products. Will it help fight inflation?

— Freezing prices sometimes, when there is speculation, helps for a short period of time. You can freeze prices for a month, two, or six months. It is simply impossible to freeze prices for the future. The price is affected by taxation, and value added tax, and so on. The price of the final product must also rise, otherwise enterprises will not be able to function normally. Therefore, freezing prices is a dead end.

But if for some short period of time, say, some goods have not been delivered, and such a method is used, then this is one question, sometimes it is acceptable. But if you look at the future, the market will determine the price itself. And therefore, regulation should take place through taxation, through reserve stocks of goods, through the fight against monopoly.

There are well-known methods of fighting inflation, not administrative ones. But our government administers everywhere. This is a totalitarian government, so it uses this lever the most, but here we must look to the future.

— Will inflation continue to gain momentum?

— As I already told you, these measures will help for a month, for two, for three. Then there will be a jump in inflation, there will be a fall in the ruble exchange rate. Today we are already seeing fluctuations in the exchange rate towards devaluation, but this is not yet the volume. The ruble money supply is still controlled. The National Bank is still not going to print “empty” money, support the economy through emission. It is trying to limit the growth of the money supply to some more or less reasonable limits.

But if the money supply grows and prices are frozen, where will the excess money go? It can go to the currency exchange. This will lead to depreciation of the exchange rate of the Belarusian ruble on the stock exchange. This money will be used to increase the prices of those goods that are not yet blocked by the government. There is logic in this - if there is an excess money supply, which leads to an increase in prices, then you can freeze the price of bread, but the price of butter will increase, the price of children's goods will increase, the price of medicines will increase. And in this way, the balance will always be maintained in the economy. There is no other way in life.

— If we talk about “inflationary expectations”, how strongly do Belarusians already feel the increase in prices in their pockets?

— I think the expectations are high. My wife keeps talking about how prices have risen sharply in recent years. I myself see this in the prices of medicines, which I have been constantly buying for more than 50 years. Prices have risen by 20-30 percent, not by 5 or 10. Of course, this leads to an increase in social exclusion in society. But if we had normal elections, this would lead to a change of power. And so the power is dictatorial, the dissatisfied sit in pre-trial detention centers, in prisons. Even not only the dissatisfied, but those who inform the population through the media, journalists. They are arrested, these media outlets are blocked, public civil society organizations are almost all closed. Even the society of mushroom lovers can be closed. They can say that anybody is an extremist, and close everything there. And that's how discontent builds up. But the government retains its leverage.

— Will social tensions grow if prices for basic goods and products increase?

— They will grow. But because of the repressive regime that exists in the country, this discontent will manifest itself mainly in the kitchens. Of course there will be resentment. But I mean that democracy is needed so that this discontent politically changes the government to a more reasonable one. So that the carriers of more effective programs that will be presented to voters, will win the elections. But for us, this is irrelevant, because we have a repressive, totalitarian system of governing the country, the economy, the people, the population, and so on.

— What do you think, when can we have changes, and what will they be associated with?

— I think that the changes should have happened in 2021. But, unfortunately, I did not wait to see them. I expect there will be changes today as well. But if it depended only on our people, then these changes would take place. But, unfortunately, Putin stands behind Belarus.

Crises in the civilized world are resolved through elections. If a power crisis occurs, then the people elect either the old or the new governments. And this is a civilized way out of any crisis, political or economic. Instead of elections, we have a system, there are repressions, there are courts and so on. The power structures see that it is possible to suppress any popular discontent, unrest, which could be resolved democratically, through elections. But the authorities resolved it through repression.

But, in the end, there will be an explosion and we have to wait for it. There was an explosion in Poland, in Romania, an explosion once happened in Hungary, Czechoslovakia. And we will come to this explosion. This productive explosion could have already happened today, in 2020.

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