Gazprom introduces new domestic market rules

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April 22, 2016 18:08

A Ministry of Economy regulation lifted restrictions (used as a regulatory instrument) on the maximum level of gas prices for businesses and individual entrepreneurs. Free gas pricing came into effect on April 18, 2012.

The impact of the new regulation will be limited, due to the fact that administrative price regulation is preserved on gas sales to gas suppliers - members of Beltopgas, as well as to large and “preferred” consumers. Nevertheless, the very fact that Gazprom managed to lobby the abolition of pricing restrictions, though still for a limited number of companies, is very significant.

Therefore Gazprom continues wringing the best economic conditions for itself, while the government unprecedentedly meets its wishes: consumers make gas payments in foreign currency, extra charges increased, and, now free pricing of gas to consumers outside the Beltopgas system has been introduced.

For information

A Ministry of Economy regulation of January 20, 2012 No 9 has set preferential gas price for nitrogen fertilizers producers at $ 218.24 per thousand cubic meters. Beltransgaz sells gas at $ 275.87 per thousand cubic meters (excluding VAT) to all other business entities.

Beltopgas organizations will sell gas at $ 275.87 per thousand cubic meters to enterprises and entrepreneurs, which consumed less than 500 million cubic meters of natural gas in 2011. Legal entities and entrepreneurs, consuming natural gas above the limits set for the replacement of natural gas with oil fuel and other local fuels, will pay $ 375.18 per thousand cubic meters. In 2012 Belarus imports gas at $ 165 per thousand cubic meters.

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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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