Stanislau Bahdankevich: Prices to Increase at Least Twofold This Year :: Charter'97 :: News

Hike in prices for different groups of goods is observed in Belarus of late. A former chairman of the National Bank of Belarus, Professor, Doctor of Science Stanislau Bahdankevich has explained “Salidarnasts” what is the reason for that, what would happen next and why the current government should be substituted.

Why Prices Rise

It all is connected with the growth of money quantity: population money income was growing two times quicker than domestic product, labour productivity and production of commodities. Besides, taxes on sales have increased by 15% (for imported products). But it looks like it touched upon the national product. This is a kind of injudicious policy pursued over the recent years. It was based on cheap resources received from Russia. It all making up one picture: low labour productivity, earnings exceed efficiency, and it is supported artificially by administrative methods. In this situation prices are bound to grow. When money quantity grows 4-5 times a year, and product grows 10% maximally, prices are bound to grow as well. It should be clear not only to economists, but to any reasonable government officials.

What Would Happen to Prices Next

In the near future hike in prices for a certain group of goods would be mitigated with the help of administrative leverage. But in general we see that prices here have been growing for a long time already: rent, accommodation payment, real estate prices show an upward tendency. But it is simply not reflected in our statistics. Last year I made a forecast that this year prices are to increase at least twofold as compared to the last year. It is connected to many factors. An underlying factor is the model of management. It’s a model where real competition does not exist, where constant administrative interference is taking place, where security market is non-existent.

What should be Done

The production should be brought up-to-date. But instead of renovation of productive capacities I heard that our government is going to get 1.5 billion dollar credit in Moscow, a billion from the West, and commercial banks are required to obtain 2 billion from abroad. We should obtain money, not channel them for eating away, but for creation. Now we have a foreign trade commodity deficiency of 2.6 billion dollars for the year 2006. It is 3.5 times as much as in 2005. It is absurd. It means that we have consumed $2.6 billion more than produced and delivered to other countries. It’s official data.

Who Could Help

Foreign loans could postpone breakdown of economy for several years. But it is not a wholesome policy. I think this government should be substituted for another, which would try to carry out structural adjustment, attract modern technologies and direct foreign investment. Not a government or banks should take credits and loans, but economic entities should attract money for certain projects.