belarus: Manual Control Instead of Economics

The experiment with state price regulation in belarus has effectively failed. Inflation over the past year was 6.8% against a target of 5%. Now the target has been raised to 7%.

No officials were found to be guilty. The head of the belarusian national bank golovchenko has explained the situation as “increased demand from the population” due to rising incomes. belarusians’ incomes did indeed grow by 9.1%, while GDP grew by only 1.3%. It was this gap that became the official explanation for further steps.

prime minister turchin stated at a meeting of the ministry of labor that wage growth should depend solely on labor efficiency, not on the market. After controlling prices, the intention is to take control of incomes as well. How exactly “efficiency” will be measured has not been specified.

The reason for the wage growth is obvious: after mass emigration, the country is facing a labor shortage. Employers were forced to pay more to retain people. The return of emigrants is not considered a solution. Instead, turchin proposed to “influence the mental attitudes of young people”.

Against this background, a separate problem is unfolding in the agricultural sector. lukashenko publicly criticized the import of russian pork worth $200 million, calling it a “disgrace” for an agrarian country. Over the past two years, belarusian enterprises have lost 340,000 pigs. Last year, russia increased pork supplies to belarus by a third, to 131,000 tons. Domestic pork prices rose by almost 15%, twice the overall inflation rate.

And this is not the only example. belarus has become the largest importer of russian beer, accounting for 30% of all russian exports worth $103 million, the second largest importer of russian sparkling wine, and has also purchased $95 million worth of russian instant coffee. There is domestic production in these categories, but it loses out on price, and there are no resources for state support.