While fighting against inflation and decreased incomes the government decided to address the consequences rather than the reason, generating additional economic problems. Administrative restrictions imposed on prices will lead to shortages, poor quality, poor range of goods and to the increased poverty of the population.
Petrol prices were cutback using administrative measures, paradoxically for the benefit of consumers of the most expensive types and of the owners of the most expensive cars. Usually less expensive diesel fuel leveled in price with the most expensive brands. Another piece of nonsense is that interests of the refinery, the main source of the foreign currency income, are neglected. Refineries were already operating at a loss in the first quarter of the year: they have foreign currency loans and they implement modernization programmes which take a significant part of the profit.
Government’s refusal to increase prices for utility services (electricity, heat, gas, waste, recycling, etc.) or transportation creates a cascade of new challenges for state monopolies, primarily for “Belenergo”, which has no foreign currency earnings, however needs it to pay for imported energy, maintenance, Chinese loans, etc. In previous years, “Belenergo” somehow made ends meet. Now the company rapidly accumulates debt. In the meanwhile, the government planned to restructure this industry and sell it to foreign investors, but who needs a generating capacity that operates with losses rather than profits?
The devaluation has already established a significant price advantage for domestic producers. They should take advantage and finally start selling a lot of Belarusian goods on the domestic market. Price restrictions will inevitably affect the quality of products, as companies will have to choose the cheapest raw materials. In Minsk and in other cities there is a shortage of some dairy products, bakeries start reducing variety, shops stop selling some goods fearing of possible sanctions for the high prices or inability to make a profit bearing in mind trade restrictions.
Another negative consequence of the current policy is that the residents of border areas of Russia are subsidized via active trade of Belarusian milk and meat products, petrol, etc.
The country's leadership has instructed the local authorities to raise minimum wages at enterprises by the end of 2019 to BYN 1,000, which would lead to an increase in the average wage in the economy as a whole to BYN 1 500. The pace of wage growth in 2017 is insufficient to ensure payroll at BYN 1000 by late 2017 without manipulating statistical indicators. In order to fulfil the president’s order, the government would have to increase budgetary expenditures on wages in healthcare and education, enterprises – to carry out further layoffs and expand the practice of taking loans to pay wages and restrict investment in modernisation of fixed assets. In 2010, the artificial increase in wages led to a threefold devaluation in 2011, an increase in the average salary to BYN 1500 will not match the capabilities of the economy and would lead to yet another devaluation.