Publication: Monitor Volume: 7 Issue: 154

In the run-up to September’s presidential election, the threat to Belarus’ fiscal integrity represented by intervention in the economy was demonstrated on June 6, when President Alyaksandr Lukashenka ordered Finance Minister Mikalay Korbut to reduce the tax burden on industrial enterprises by 3 percent. Korbut publicly acknowledged that such a target was unattainable but that the government would make an effort to do so.

Enterprise losses have caused wage arrears to grow as well, providing another area for interference by the presidential administration. At the end of July, noting that arrears to workers had exceeded 1 billion roubles, Lukashenka ordered that all wages through June be paid by August 3. In the past, politically motivated campaigns to quickly clear up arrears in payments by enterprises have been facilitated by government pressure on commercial banks to direct new credits on soft terms to the financially troubled enterprises. Under the monitoring arrangement with the IMF for April-October 2001, the government and the National Bank have agreed to abandon such practices. Nevertheless, already in April the IMF team had complained of government pressure on commercial banks to lend to agricultural enterprises. Such lending has served as a major source of inflationary pressure in Belarus in the past.

The target for the consolidated budget deficit in 2001 is 218 billion roubles, or 1.4 percent of the official forecast for GDP. That level is consistent with external financing anticipated to be made available later in the year. The Finance Ministry also has in place a set of contingency measures amounting to 0.7 percent of GDP if external financing is not forthcoming. The government has pledged to the IMF to keep the deficit at the level of financing actually available. In the interest of trimming financing requirements, the government will phase in wage hikes in the budgetary sector in 2001, synchronizing these increases with cutbacks in budgetary subsidies to households, including those for transport, housing and utilities, through increases in applicable tariffs. Even after an 80-percent hike in utility rates this spring, households were paying only some 25 percent of the cost of heating and hot water. The Minister of Housing and Municipal Services, Alyaksandr Mikolta maintains, however, that additional rate hikes are not planned for the near future. When asked if this decision had been coordinated with the IMF, Mikolta said that he had no dealings with the IMF, adding that his ministry answers to the president (Belapan News Agency, June 6).