State employees’ salaries increased: a promise that had to be fulfilled
Canceled in August, the raise of the tariff rate for the first class workers would be implemented in September. Accelerated inflation in August made indexing of wages inevitable. Increased incomes will increase domestic demand and may result in greater inflation.
On August 20th, 2012 the Council of Ministers of the Republic of Belarus adopted a resolution No 769, setting the tariff rate for the first class workers at BYR 225,000.
On September 1st, 2012 a new tariff rate for the first-class workers will be BYR 225 thousand (increased by 7.1%), which will raise the salaries in the public sector by 6.1% on average. The regulation also increases differentiation among employees in terms of payment, depending on the complexity of work.
There are funds in the state budget to increase salaries in the public sector. Consolidated budget surplus in the first half of 2012 will beBYR 3.7 trillion. Belarusian companies earned BYR 41.9 trillion net profit. Additional budget revenues will thus be redistributed in citizens’ favour.
Increase in the tariff rate is lined to the inflation. In August, due to the increased utilities’ costs inflation accelerated. During the first two weeks in August, consumer prices rose by 1.5% compared with average prices in July. Indexation of wages is carried out if inflation reaches 5% and higher during a period. Thus, state employees’ salaries increase is a forced and inevitable measure.
The average salary in the public sector with the increase from September 1, 2012 will be BYR 3.2 million. Officials’ wages lag behind the average in the economy, and such disparity has a negative impact on employment in the public sector. The outflow of workers into other spheres can lead to a staff shortage for a number of vacancies.
However, there are some negative trends in the economy. Industrial growth slowed down. Labour productivity could not keep up with the growth of wages in the economy. Unfavorable trends in foreign markets for a number of Belarusian products can reduce profits.
In these circumstances, additional incomes of state employees may increase domestic demand, increase imports and result in a general price growth, including services cost, which will level incomes’ growth.
President Lukashenka has met with the head of Chechnya Ramzan Kadyrov, who visited Minsk and the Minsk Automobile Plant. Minsk has always sought to have independent links with Russian regional elites, partially, to compensate for the Kremlin's diminishing interest in Belarus. In recent years, Belarus’ contacts with the Russian regions have been extremely intense. However, with some leaders of Russian regions, primarily heads of large republics, communication was more difficult to build. As many analysts in Minsk suggested, Minsk could regard contacts between President Lukashenka and the head of Chechnya as an additional communication channel for relieving tension in relations with the Kremlin. However, most likely, a trusting relationship with Kadyrov is a value for Minsk as such, provided Kadyrov’s broad business and political interests, and a high degree of autonomy for the Chechen leader from the Kremlin.