Uladzimir Matskevich: Budget-2016 leaves a weird impression

Proclaimed inflation (which, above all, has to be held within the planned frames) will eat up the growth of expenses on social programs.

The rhetoric of the Belarusan authorities has always been demonstratively conservative; however, changes are taking place – they are visible both in the state budget for 2016 as well as in negotiations with the international creditors.

Uladzimir Matskevich, philosopher and methodologist, told about changes in the Belarusan economic policy in the interview with the “EuroBelarus” Information Service.

- Traditionally, taxes are reduced in the time of the crisis. However, the Belarusan authorities are only mounting the burden of taxes both for the citizens as well as for the legal entities: starting from January 1 the price of gas and electricity increases by 20% for individuals; small business will be taxed more, too. What can be the explanation of so obvious disregard for economic laws?

- Frankly speaking, I see no particular disregard for economic laws here. Increase of prices on energy is a forced measure, caused by the crisis phenomena. And it can be explained. Although the "socially oriented economy" would be able to survive without such measures.

The government is considering a moratorium on the increase of the existing and appearance of new taxes, as evident from the statement of the Ministry of Economy, given that in the course of the entire 2015 completely wild tax ideas were discussed: a tax on freeloaders and taxes on parcel. But these initiatives are ascribed to Miasnikovich and all his economic innovations have always resembled a socialist trash. Apparently, the regime needs Miasnikovich in order to distract public attention from serious issues by inventing all sorts of wacky ideas.

It’s much more interesting to analyze the structure of tax revenue, where one can find a lot of interesting. For example, the share of tax revenues from foreign operations increased by 1.8 times and is almost 2 times higher than the share of revenue from income tax. The majority of the tax revenue is still made up by the value added tax. The increase in income from foreign trade in 2015 (compared with 2014 year) suggests that some new trend has appeared. We still need to understand and interpret what does it mean.

Tax revenues from foreign economic activity affected both exports and imports. For Belarusan export-oriented economy this is a significant moment. Perhaps it would be better for the economy if the revenues from income tax were growing, because one way or another, the foreign economic activity brings profit to property owners, to businesses, and to individuals. Growth of revenues from personal income tax would indicate the growth of profit of enterprises, businesses, and individuals. If, however, the share of income taxation of foreign economic activity (from excise tax, duties, and tax rates) is growing, it means that the foreign economic activity is being over-regulated.

- It took less than an hour for the House of Representatives to adopt the law on state budget for 2016. Just like in Russia, the budget is formed with the help of only one parameter – the price of oil, which is $50 per barrel. What can it mean?

- The budget-2016 that is adopted by the House of Representatives and approved by the Council of the Republic leaves a weird impression. On the one hand, the whole budget makes about $10 billion, or 180 trillion Belarusan rubles. At the same time, Belarus is constantly using foreign loans that make up to 30% of its annual budget. The surplus for 2016 is about 10% of the whole budget. It’s interesting that the budget explains where the 17 trillion rubles will go – to the discharge of foreign debt, not for social programs.

However, some increased expenses will also go for social programs, health care and pension system in particular. However, salaries are stipulated to grow by 13%, whereas the inflation is forecasted to reach the level of 12% - basically, the increase in salaries for state employees will be eaten up by inflation, which, above all, has to be held within the planned frames. It means that the dollar rate has to be held at a certain rate during the entire 2016.

The budget is built on the basis of $50 for a barrel of oil. It’s very hard to say where has this figure come from, given the current situation with energy. Belarusian authors of the budget explain it by the connection to the similar figure in the Russian budget. But now even Russia revises its budget on the basis of $40 for a barrel of oil. For the Belarusan economy, which exports mainly refined oil and oil products, it means more value added tax funds.

It’s quite hard to say whether the Belarusian economy will cope with such trends, given the fact that fiscal policy is one of the main legitimate ways of state’s intervention in economic development. It is quite difficult to say whether the government will abide by the approved standards, because the Decree No.4 “On a moratorium on the increase in the number and rates of taxes” hasn’t been introduced yet. Everything will depend on the economic situation that is emerging in our region in connection with the extremely high dependence of the Belarusian economy on Russia, limitedness of possibilities that Belarusan authorities have under the obligations within the frames of the Eurasian Economic Union and under the obligations to creditors (not only Russian ones).

However, even there we witness some changes. For example, the Belarusian government has reduced the size of the requested loan from the Eurasian Fund for Stabilisation and Development (EFSD) from $3 to $2 billion. What does it mean: that the appetites have diminished, or that Belarus is seeking to reduce its dependence on Russia?

Time will show.

- Political and economic revitalization of the Belarusian authorities happened after Lukashenka’s return from Moscow. What happened in Kremlin?

- Negotiations didn’t bring success. But it’s not about the negotiations or short-term actions, because the 800-page budget with a bunch of indicators could not be calculated based on the results of the negotiations; it was being prepared in the course of the year. If we look at the budget, we should admit that the economic policy is a long-term one and doesn’t depend on the mood of the presidents and the results of their meetings; regular meetings between Putin and Lukashenka are enough.

- De jure, Lukashenka has legitimized the new old government only two months after the presidential campaign. What was he waiting for?

- Confusion in the reappointment of high-level officials is related to the size of the substitute’s bench: in fact, the personnel register that Lukashenka can rely on is extremely limited; many high-level officials have repeatedly taken different positions – they just swap places. It proves that the government, the regime has no clear idea of ​​what reforms and changes in economic and political sphere are needed and what the authorities can do in the near future. It is related with a very narrow range of opportunities which they see.

By and large, little depends on the appointments, even if among the political elites: centralization of power is such that even the Prime Minister, the Chair of the National Bank, and the heads of key ministries are rather executors than initiators, authors of ideas and offers of strategic vision. Therefore, Lukashenka has nowhere to hurry. And even if he wanted to, he could do nothing about it – he would just change some officials in their positions.

- Andrei Kabiakou spoke outright that we shouldn’t expect new policy from the old government. So what can we expect from it?

- I would treat Kabiakou’s words in two ways. On the one hand, the rhetoric of the Belarusian regime is intentionally and exaggeratedly conservative. The authorities never declare any changes. But changes do take place – they are visible both in the state budget for 2016 as well as in negotiations with the international creditors and with the international financial institutions. This is evident in attempts to restructure the Belarusan export and foreign trade.

Another aspect of changes, which Kabiakou and the government prefer to hide, is related to the sanctions against Russia. They lead to an increase in the gray or even black economic segments: shady export-import operations, re-exports of goods and services that fall under the sanctions, as well as all sorts of transactions in the energy market. These changes are due to the external circumstances, to which the Belarusian government is forced to adjust. Of course, there is no tradition to voice these changes.

Therefore, the statement Kabiakou made is slightly conniving.