The authorities try to solve a dilemma: how to raise salaries and to keep citizens’ money in the economy?
At a meeting on May 3 with the Chairman of the Federation of Trade Unions, L. Kozik, President Lukashenko announced that the average salary in Belarus by the end of 2012 should amount to 500 USD, and that this should happen in tandem with a rise in labor productivity.
Lukashenko’s statement concerning the average salary increase of up to 500 USD in equivalent suggests that, firstly, the authorities are afraid of protest moods among workers who are unsatisfied with low salaries. That is why several governors have stated earlier that salary increase according to the stated level is inevitable and the KGB has reported that measures on social tension relief were successfully implemented in several enterprises in 2011.
Secondly, the fact that the President has joined a “salary rush” demonstrates Lukashenko’s desire to fulfill his famous election pledge of 2012 (the average salary shall be equivalent to 500 USD) and that finances therefore are likely to be raised. A reservation concerning the corresponding rise in labor productivity made by the President shall be treated as an essential backstop: the President will use this to justify a broken promise and to postpone its fulfillment.
The majority of Belarusian experts think that as far as it is extremely difficult to raise labour productivity (according to official figures, in March the average salary in Belarus approximately amounted to 390 USD), the Belarusian authorities will resort to money printing in order to implement its plan.
In this case the main task will be to prevent the most common citizens’ behaviour scenario: translation of Belarusian roubles into foreign currency as it happened in 2010.
For this purpose, the Government and the National Bank launched two large information campaigns in April and May. Firstly, Deputy Prime Minister Rumas personally advertised a so-called \"people’s IPO\": the first public offering of the Minsk Plant of Sparkling Wines on May 2 in which citizens were actively offered to participate. Secondly, in April the National Bank launched a campaign to promote financial literacy during which it is planned to tell Belarusians about various ways of investment.
Nevertheless, it is expected that in the case of the promised salary increase by the year’s end (1.3 times), the authorities will simply not manage to educate its citizens about types of investment which are safer and more favorable to the economy. Most likely the population will habitually continue to transfer extra money into foreign currency. This steady trend in the behavior of Belarusian investors has been observed for at least the last four years. In summer 2011, the Administration of the President of Belarus estimated the foreign currency cash holdings of Belarusians to be 7 billion USD.
According to Belstat, in August 7,600 people were dismissed, including 4,800 civil servants. Dismissals of civil servants were due to the optimisation in the public administration by up to 30%. Some civil servants would retain their job however would lose the status of a civil servant. Vacancies on the labour market are likely to reduce in number, thanks to the optimisation, the state administration would increase wages for public servants. The payroll fund for retained employees is likely to increase and some former state employees are likely to get jobs in affiliated organizations. The optimisation of the state apparatus should complete by January 1st, 2018, and some former civil servants are likely to join the ranks of the unemployed.