Lukashenko finds new ways to delay negotiations with the Kremlin

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April 22, 2016 18:29

On April 26th, while talking to reporters, President Lukashenko stated that so far the issue of opening a Russian airbase in Belarus was not discussed, but only the supply of Russian fighter jets and S-300 missiles.

In the coming two years, Lukashenko’s the only political goal is to maintain and strengthen his role as a non-alternative mediator in the negotiations with Russia. Simultaneously, domestically he needs to keep up his positions as a leader, who is autonomous and independent from the Kremlin.

Lukashenko’s statement was intended to clarify and partially refute another statement made on April 23rd by Russian Defense Minister Sergei Shoigu in Minsk. During the meeting with Lukashenko, he said that in 2013, it was planned to create a commander and post-duty unit for fighter jets in the Belarusian military and by 2015 Russian aviation regiment would be deployed to Belarus.

Since the talks are about the airbase, this information should be treated critically. However, the negative response to the news about the airbase, forced President Lukashenko to react and to say that Russian fighter jets and S-300 supply was primarily for the Belarusian army needs. But Lukashenko de facto has not denied the possibility for the Russian airbase in Belarus.

Military cooperation with Russia objectively creates a negotiating base for President Lukashenko, which he would like to use to mitigate or delay Belarusian state property privatization. Besides, Belarus is preparing for the elections (local elections in 2013-2014 and presidential elections in 2015), which forces Lukashenko to look for new ‘trump cards’ in negotiations with Russia and to demonstrate the inevitability of his candidacy for the country.

It is very likely that the Shoigu’s statement on April 23rd about plans to establish an airbase - to which Lukashenko has silently agreed - really was a result of some kind of negotiations. It is also very likely that President Lukashenko will delay the negotiations for the aircrafts’ supply or about the airbase deployment, which is clear from his recent statement on April 26th.

To delay the negotiations, Lukashenko will probably use the Belarus’ sovereignty argument, as well as the opposition potential to demonstrate the ‘people’s rage’. If the situation is favourable for the Belarusian authorities, the negotiations about the state property privatization and the Russian airbase deployment will be postponed until the 2015 elections. At the same time, Lukashenko will retain his status as the only guarantor of fulfillment or non-fulfillment of agreements by Belarus, which eventually will help him to retain and enhance his domestic political authority.

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Growth in real wages may disrupt macroeconomic balance in Belarus
October 02, 2017 12:12
Фото: Дмитрий Брушко, TUT.BY

The rapid increase in wages has led to a decline in the ratio between labour productivity and real wages to one. Previously, the rule was that enterprises, in which the state owned more than 50% of shares in the founding capital, were not allowed increasing salaries if this ratio was equal to or less than one. The authorities are unlikely to be able to meet the wage growth requirement without long-term consequences for the economy. Hence, the government is likely to contain wage growth for the sake of economic growth.

According to Belstat, In January – August 2017, GDP growth was 1.6%. The economic revival has led to an increase in wages. In August, the average monthly wage was BYN 844.4 or USD 435, i.e. grew by 6.6% since early 2017, adjusted for inflation. This has reduced the ratio between labour productivity and real wages from 1.03 in January 2017 to 1 in the first seven months of 2017. This parameter should not be less than 1, otherwise, the economy starts accumulating imbalances.

The need for faster growth in labour productivity over wage growth was stated in Decree No 744 of July 31st, 2014. The decree enabled wages growth at state organizations and organizations with more than 50% of state-owned shares only if the ratio between growth in labour productivity and wages was higher than 1. Taking into account the state's share in the economy, this rule has had impact on most of the country's key enterprises. In 2013 -2014 wages grew rapidly, which resulted in devaluation in 2014-2015.

Faster wage growth as compared with growth in labour productivity carries a number of risks. Enterprises increase cost of wages, which subsequently leads to a decrease in the competitiveness of products on the domestic and foreign markets. In construction, wholesale, retail trade, and some other industries the growth rate of prime cost in 2017 outpaces the dynamics of revenue growth. This is likely to lead to a decrease in profits and a decrease in investments for further development. Amid wage growth, the population is likely to increase import consumption and reduce currency sales, which would reduce the National Bank's ability to repay foreign and domestic liabilities.

The Belarusian government is facing a dilemma – either to comply with the president’s requirement of a BYN 1000 monthly wage, which could lead to new economic imbalances and could further affect the national currency value, or to suspend the wage growth in order to retain the achieved economic results. That said, the first option bears a greater number of negative consequences for the nomenclature.

Overall, the rapid growth in wages no longer corresponds the pace of economic development. The government is likely to retain the economic growth and retrain further growth in wages. Staff reshuffles are unlikely to follow the failure to meet the wage growth requirement.

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