Price setback

April 22, 2016 17:52

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.

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