Late start of growing prices for services for the population

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April 22, 2016 17:57

Prices and tariffs continue growing in Belarus. On 4 August public transport fares were increased by 3% to Br 900, on average by 10% increased the tariffs for the population for heating, hot water supply and natural gas.

On 3 August the minimum purchase prices for 2011 agricultural crops purchased for state needs raised by 60% to 100%.

Comment

The expected increase in gas prices ($ 270 on average, against $ 185 in 2010), as well as the devaluation make the government increasing the tariffs for the population. At the same time, in the framework of the EurAsEC Anti-crisis Programme the government promised to cover 30% of the tariff’s costs (currently about 10% for the heating). Therefore in the autumn the growth of utility services rates will become one of the driving forces of inflation. Moreover, new crop production prices will affect prices for flour and bakery products, cereals, beer, sugar, meat and meat products (fodder). This means the country falls into an inflationary spiral “costs – prices”. The solution requires considerable political will at the cost of recession and significant reduction of incomes.

Experts’ expectations, including ones from the National Bank, who said that the devaluation would not be a panacea for solving the problems of the Belarusian economy, proved right. Inefficiency and unwillingness of producers to stop emissions completely translates into a new round of prices; the decline in real income the government is trying to compensate with increases in wages and pensions, which puts pressure on the costs. Given the circumstances, finding the guilty one (the National Bank) would have a propaganda effect only. However in order to achieve the real effect, competent, professional and independent monetary policy needs to be implemented.

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