Mis-reporting Provokes Mismanagement

April 22, 2016 18:26

On February 13th ‘refined’ data about GDP growth in January 2013 was published.

Belarusian authorities by all means try to avoid GDP and international reserves’ fall. They use different means, but the basic idea is not to lower these indicators. Achieving the desired values, they create the illusion of proper economic development, but consequently make improper management decisions.

Published statistics reported 3.1% GDP growth. The growth was possible due to a significant increase in net taxes on products. Without this component, GDP decreased by 0.8%. In 2012, the way net taxes on products were calculated was changed. Finance Ministry found ways to calculate the volume of industrial subsidies, which resulted in an increase in net taxes on products. Conventionally, GDP growth is provided by increases in stocks and investments in fixed assets.

In 2012, capital investments were not actively used to increase GDP because of tight monetary policy, which had resulted in decreased value added in the construction and the GDP growth rate by 0.6 percentage points. In 2013 the government plans to increase the volumes of housing construction and investment in fixed assets. Thus, GDP is prevented from falling by manipulations with GDP components’ calculation methodology and increased investment in the construction. It is crucial not to show GDP drop in total over the period (month, quarter, semester or year). GDP fluctuations within the period are allowed.

The situation with foreign exchange reserves is slightly different. The key standard for reserves is USD 8 billion. The National Bank, using entire banking system, seeks to prevent the fall of the gold reserves below this figure to date. Unlike GDP, international reserves statistics is published as of a concrete date, which allows for certain manipulations to mask the reduced volumes: for instance, by short-term borrowings from banks and repayments after the reporting date in question. In addition, the National Bank has a certain amount of liquid assets which are not included in the gold reserves due to non-compliance with the IMF standards (because of their liquidity or the counterparty rated as lacking reliability). On June 1st, 2012 the funds not included in international reserves were net swaps with China (more than USD 2 billion). On February 1st, 2013 these resources fell to USD 1.2 billion. By maintaining the international reserves at the same level, the National Bank attempts to reduce population’s devaluation expectations, which could result in assets’ sharp outflow from the banking system.

There is rationale behind maintaining the level of international reserves: population is satisfied with the illusion of control. Most nationals are not financially literate enough and if the level of international reserves does not fall, they will not ask additional questions.

The situation with ensuring GDP growth rate is rather irrational and could have negative consequences. Certain manipulations allow reporting ‘correct’ GDP growth rates, as a result, target figures are set for enterprises, warehouses’ stocks grow, financial situation at the enterprises deteriorates, and new manipulations to show the desired result are invented. The overall picture in the economy is distorted to show better figures, which affects the adequate and timely response to emerging issues.

Thus, the Belarusian authorities are trying to improve the economic performance by distorting the picture. First of all, it affects themselves, when based on distorted picture they make wrong management decisions. This vicious circle can be broken by reorienting towards the qualitative parameters, rather than quantitative, but this solution does not find understanding at the highest governmental levels. Only economic challenges may facilitate the change in the attitude to economic indicators.

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The Belarusian authorities have launched a discussion on the moratorium or abolition of the death penalty under the pressure of Belarusian human rights activists and international community. Apparently, the authorities are interested in monitoring public sentiments and response to the possible abolition of the capital punishment. The introduction of a moratorium on the death penalty would depend on the dynamics in Belarusian-European relations, efforts of the civil society organisations and Western capitals.

In Grodno last week, the possibility of abolishing the death penalty in Belarus or introducing a moratorium was discussed.

The Belarusian authorities are likely to continue to support the death penalty in Belarus. During his rule, President Lukashenka pardoned only one person, and courts sentenced to death more than 400 people since the early 1990s. Over the past year, Belarusian courts sentenced to death several persons and one person was executed.

There are no recent independent polls about people’s attitude about the death penalty in Belarus. Apparently, this issue is not a priority for the population. In many ways, public opinion about the abolition of the death penalty would depend on the tone of the state-owned media reports.

That said, the Belarusian Orthodox Church and the Roman-Catholic Church stand for the abolition of the capital punishment, however their efforts in this regard only limit to public statements about their stance. Simultaneously, the authorities could have influenced public opinion about the death penalty through a focused media campaign in the state media. As they did, for example, with the nuclear power plant construction in Astravets. Initially unpopular project of the NPP construction was broadly promoted in the state media, and eventually, according to independent pollsters, was accepted by most population.