Belarus hopes for deferment of gas payment
The deferral of payments will enable the country to make substantial savings, critical for the treasury at the moment. As well, it will bring down the foreign currency demand, affecting the overall balance of supply and demand of foreign currencies and the ability of the National Bank to inhibit the USD growth.
Belarus and “Gazprom” have nearly completed negotiations about the gas price in 2012, the agreement will be finalized during a meeting of Dmitry Medvedev and Alexander Lukashenko, Prime Minister of Russia Vladimir Putin said.
Belarus wants to deferment the payment for gas delivered in 2011 till 2012.
Belarus proposes either to distribute the amount due for gas delivered in 2011 equally through 2012, or to make quarterly payments, or to include debts into the gas price. According to unofficial information, Belarus has already received a prior consent of Russia to deferment the gas payments, currently the gas price for Belarus is under discussion.
Bearing in mind that, according to the National Statistics Committee, on 1 August Belarus had no gas payments arrears, the amount of debt in question had accumulated since July.
The National Statistics Committee data published on 14 October, quotes that arrears of Belarus for gas by 1 September amounted to Br 267.4 billion (USD 50 million calculated by the NBB exchange rate of 1 September). Bearing in mind that, according to the National Statistics Committee, on 1 August Belarus had no gas payments arrears, the amount of debt in question had accumulated since July (Belarus gas payments are due on 21-23 day of the following month). Accordingly, Belarus underpaid for gas in September (for August) as well. Therefore, it is likely that Belarus is trying to negotiate a deferment of payment of not only an already existing debt, but also of the overall amount of payment due for future deliveries in the remaining 3 months.
The statistics says Russia has shipped about 13.4 billion cubic meters of gas during the past 8 months of 2011. The average price was USD 246. Therefore in January - August Belarus had to pay almost USD 3.2 billion to “Gazprom”, or USD 400 million per month on average. With the commencement of the heating season, gas consumption increases by more than twice therefore the deferral of payments will enable the country to make substantial savings, critical for the treasury at the moment. As well it will bring down the foreign currency demand, affecting the overall balance of supply and demand of foreign currencies and the ability of the National Bank to inhibit the USD exchange rate growth.
The rapid increase in wages has led to a decline in the ratio between labour productivity and real wages to one. Previously, the rule was that enterprises, in which the state owned more than 50% of shares in the founding capital, were not allowed increasing salaries if this ratio was equal to or less than one. The authorities are unlikely to be able to meet the wage growth requirement without long-term consequences for the economy. Hence, the government is likely to contain wage growth for the sake of economic growth.
According to Belstat, In January – August 2017, GDP growth was 1.6%. The economic revival has led to an increase in wages. In August, the average monthly wage was BYN 844.4 or USD 435, i.e. grew by 6.6% since early 2017, adjusted for inflation. This has reduced the ratio between labour productivity and real wages from 1.03 in January 2017 to 1 in the first seven months of 2017. This parameter should not be less than 1, otherwise, the economy starts accumulating imbalances.
The need for faster growth in labour productivity over wage growth was stated in Decree No 744 of July 31st, 2014. The decree enabled wages growth at state organizations and organizations with more than 50% of state-owned shares only if the ratio between growth in labour productivity and wages was higher than 1. Taking into account the state's share in the economy, this rule has had impact on most of the country's key enterprises. In 2013 -2014 wages grew rapidly, which resulted in devaluation in 2014-2015.
Faster wage growth as compared with growth in labour productivity carries a number of risks. Enterprises increase cost of wages, which subsequently leads to a decrease in the competitiveness of products on the domestic and foreign markets. In construction, wholesale, retail trade, and some other industries the growth rate of prime cost in 2017 outpaces the dynamics of revenue growth. This is likely to lead to a decrease in profits and a decrease in investments for further development. Amid wage growth, the population is likely to increase import consumption and reduce currency sales, which would reduce the National Bank's ability to repay foreign and domestic liabilities.
The Belarusian government is facing a dilemma – either to comply with the president’s requirement of a BYN 1000 monthly wage, which could lead to new economic imbalances and could further affect the national currency value, or to suspend the wage growth in order to retain the achieved economic results. That said, the first option bears a greater number of negative consequences for the nomenclature.
Overall, the rapid growth in wages no longer corresponds the pace of economic development. The government is likely to retain the economic growth and retrain further growth in wages. Staff reshuffles are unlikely to follow the failure to meet the wage growth requirement.