Government promises to compensate consumer prices’ growth

April 22, 2016 17:59

The Government plans to pay out compensations to state employees and pensioners. Therefore between unemployment and inflation the government chooses inflation. While “pouring money over prices” they believe that poor, but employed workers will concentrate on the survival, strife to preserve their jobs and will not protest.

On 31 August selling prices for beef and pork have been increased by 10% again.

On 1 September the government has drastically raised the rates of a number of utility services provided to households. In particular, the monthly housing maintenance rate was raised by 10% to Br 340 per square meter, the cold water supply rate by 25.1% to Br 585 per cubic meter, the sewage rate by 26% to Br 305 per cubic meter, and the monthly elevator charge by 19.6% to Br 1,700 per tenant.

Alexander Lukashenko promised to pay out compensations of Br 500 thousand to state employees and pensioners for the purchase of seasonal agricultural products. Then he plans to increase the base salary for first-class employees of budgetary institutions. He also promised quarterly increases of benefits to families with children. Pensions and student allowances are also planned to be increased in the autumn.

Comment

Consumer price growth is gaining momentum as a consequence of the delayed effect of devaluation (expenses of enterprises increased), and due to the working print press. The government is trying to compensate the rising prices with the growth of revenues, which spurs further inflation. However, between unemployment and inflation the government chooses inflation. While “pouring money over prices” they believe that poor, but employed workers will concentrate on the survival, strife to preserve their jobs and will not protest, because they have something to lose (dissatisfied ones would leave for jobs in other countries). At the same time, significant tightening of the monetary policy and economic restructuring implies the cease of operation (or partial) of a number of plants and rising unemployment, which is, for political reasons, the greater evil for the authorities than inflation. However in the long-term, soft monetary policy would contradict the efforts to achieve a balanced currency exchange rate and its setbacks, as well as macroeconomic stability. Therefore the prices will continue growing faster than revenues and the decline in real income will remain.