Bahdankevich: Belarus Is Poorer Than Ukraine Now

The government will fail to meet the expected 12% of an annual inflation.

The prime minister of Belarus Andrei Kabyakau says the situation with the inflation level raise concern. "Over four months the inflation growth equals to 6.4%," Kabyakau stated at the Cabinet meeting.

According to the ex-head of the National Bank of Belarus Professor Stanislau Bahdankevich, there are several factors affecting the inflation growth today.

- The inflation growth is always connected with money, with its surplus. This surplus formed up as soon as the government has supported loss-making enterprises using budget. It granted money as if those enterprises sold out finished products of warehouses and collected accounts receivable, the expert said in the interview of Zautra Tvaye Krainy. - Warehouses are filled with finished goods, money is granted, new salaries are paid and so on. This is a monetary factor only.

The second factor is low competition related to administrative interference of authorities in import, its limitation. When there is no surplus of mass of commodities in the market, prices always grow. The National Bank takes a tough policy. However, it does not cover all the money supply. There are budget, the Bank of Development which provides 40% of preferential loans– the refinancing rate is 22% and the development Bank issues money at 7-9%.

This money, the expert believes, is used less efficiently because during inflation in the year around 20% are allocated by the Bank of Development, which is regulated by the government.

Stanislau Bahdankevich has doubts that the government will meet the expected 12% of an annual inflation.

- To some extent the drop of cash incomes of population suspends the inflation, pensions are not rising, wages are growing slowly, the prime minister Kabyakau made a remark to state enterprises lest they increase wages because productivity is getting low, but not increasing, ex-head of the National Bank of Belarus says. - But there are six months left yet, if there was a recovery programme for the economy, it would be possible to retain inflation at least at 15%.

The refinancing rate in Ukraine equals to 19%, in Belarus 22%. Their forex reserves doubled last year, it is the country that's waging a war and facing huge problems. Their GDP increased by 1% in the first quarter, it is extremely low; however, our GDP fell by 3.6%. If we had a revival of the economy, the inflation would not raise at a rapid rate.