Belarus increases debt for gas to Russia

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April 22, 2016 18:00

In the third quarter of 2011 Belarus owes Russia about $ 140 million for delivered gas and expects to pay for it $ 245 instead of $ 280. The increased debt to Gazprom is one of the ways to artificially reduce the foreign currency demand at the foreign exchange, and to postpone further devaluation of the ruble.

The Beltransgaz requested the Gazprom to defer payments for the third quarter of 2011 gas deliveries and to pay $ 245 per c.m. (the price applied to the second quarter of 2011) with the contract price for the third quarter of $ 279. During the third quarter of 2011 4.231 billion cubic meters of gas have been delivered to Belarus, therefore the underpayment is about $ 140 million.

Against the background of long discussions about the draft socio-economic development plan and 2012 budget negotiations the Belarusian government has not dared to name the target price of gas for the next year. As a result, preliminary price has been voiced by the Russian Ambassador to Belarus Alexander Surikov: USD 180 per c.m. He noted, however, that the gas price had not yet been finalized.

Comment

The increased debt to Gazprom is one of the ways to artificially reduce the demand for foreign currency at the foreign exchange, and to postpone further devaluation of the ruble. In the short term, this policy is effective, but in the long run has two problems: 1) the proceeds from the privatization of Beltransgaz will be swallowed by the accumulated debt, and 2) the new lower price of gas has not yet been confirmed by the Russian leadership, potentially it could be an unpleasant surprise for the financial authorities of the country.

 

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Growth in real wages may disrupt macroeconomic balance in Belarus
October 02, 2017 12:12
Фото: Дмитрий Брушко, TUT.BY

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.

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