President Lukashenko ornaments foreign policy

Category status:
April 22, 2016 18:17

Before the elections, the country’s leadership takes hasty advance measures to mitigate the effects from the highly probable non-recognition of the legitimacy of the new parliament and the electoral process by the international observers. The authorities hope to limit their measures to the public relations domain.

On August 21st, President Lukashenko delivered a programmatic speech at the Belarusian Ministry of Foreign Affairs and presented the new Minister Vladimir Makey. On August 24th, the President met with staff of the international TV project “Welcome to Belarus”.

Country’s authorities act primarily in the field of public relations to improve their image. President’s surroundings believe that Vladimir Makey’s appointment as Foreign Minister will be welcomed by, first of all, the EU and the U.S., since Makey was the main policy maker behind Belarus’ Western foreign policy during the ‘liberalization’ period in 2008-2010. Therefore, President Lukashenko hopes Makey’s diplomatic skills will “normalize relations with the West”, during conflict periods in particular. It is clear that today Belarus and the West are in a conflict state.

Simultaneously, the Belarusian authorities still hope they do not need to fulfill the conditions for the resumption of the dialogue with the EU and the U.S. – to release and rehabilitate political prisoners. In particular, Lukashenko in his well-known manner, reminded the Foreign Ministry staff and reporters that today’s main challenges and risks for Belarus “are external and brought to our country by some world forces interested in destroying the stability of the Belarusian society and the state”.

Such rhetoric is rather traditional for Lukashenko and indicates that the release and rehabilitation of convicted politicians and activists is regarded as a stake card in a bargaining game, which, in the authorities’ view, has not yet begun therefore leaving any tangible democratization in the political life out of the equation. Lukashenko aims to reach a compromise at the minimal cost.

For example, such a compromise could be the minimum possible “positive” assessment of the election campaign by the OSCE and PACE international observers. Judging by the President’s statements, the government welcomed the recognition that the image of Belarus was changing for the better. In terms of the election observation mission during the parliamentary elections, the authorities would like to see ‘progress’ being asserted.

Following this logic, it is not a coincidence that on August 19th an international TV project “Welcome to Belarus” has been launched, which shows six families from China, Germany, South Korea, Spain, France and the United States making guided tours around Belarus. On August 24th, President Lukashenko personally met with the participants in the show and reiterated that Belarus was an open and welcoming country.

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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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