Financial Resource of the Cockroach Exhausted

• 2.03.2021, 8:41

The expert reports on the inability to find money to pay salaries and pensions.

How can the income of Belarusians decrease? What do the loans for food mean? Are there prospects for economic growth in the current situation? An expert of the Strategy analytical centre, Viktoria Vasilevich, answered these questions for Myfin.by.

Belarusians are offered food on credit

The most powerful retail network in the country has announced that it will issue loans for purchases: E-dostavka from Euroopt already offers goods on credit. Belarusians will be able to pay for bread and milk during the year - as long as the order value exceeds 50 rubles... What does it mean?

- The prudent bank secures its owner's revenues, justly assuming the fall of the population's incomes in the situation of economic collapse in Belarus. The main shareholder of Statusbank is Eurotorg, which owns, among other things, a network of stores Euroopt and E-dostavka. This particular bank announced it would lend at 24% for 12 months and at 25% per annum for 36 months. (When the article was in progress, there was only one of all options left - 25% for 36 months - a comment by Myfin.by.) These are loans for subsistence. Contrary to the promises of the authorities, the cost of it will grow monthly by 2.083% for those who used Statusbank's service.

At the same time, there's a restriction - loans for food will not be issued to Belarusians over 67 years old. How could it happen? Why do the owners of Euroopt deprive pensioners over 67 years old of the opportunity to buy food on credit?

After all, if a person does it, he most likely does not buy truffles and black caviar. It is a forced measure to which people resort when they cannot afford to meet basic needs for their salary or pension.

It is hard to evaluate the offer. When there is nothing to eat, people will buy anything to feed their family, children and perhaps even grandchildren. More than 2% per month is a high price for those Belarusians who have no money other than borrowed ones. I think not all citizens of our country can afford even such an expensive loan in the current circumstances.

The second attempt

I will assume that this loan explains the lack of ability to use instalment cards...

- I understand they remained. However, the snowball of problems in the economy is comprehensive. It seems that instalment cards have already been used by many customers. The overdraft is not infinite, and we observe a new credit product of Euroopt.

Interestingly, Belarus has launched such a program, not for the first time. The first attempt dates back to the early 21st century. It did not find a response from consumers even at that difficult time in the life of the country.

Hence, 25 years later "stable and prosperous" Belarus introduces a loan for food at a high (in the opinion of the residents of the neighbouring countries - Poland, Lithuania, Latvia, and even Russia) interest rate. I believe it will be in demand. The reason is simple: tens of thousands of Belarusians haven't earned wages needed to support their families and buy essentials, be it food, clothes, or footwear.

Not a salary but a budgetary allowance

If the largest nationwide retail chain decides to sell food on credit, it indicates systemic problems with people's incomes, doesn't it?

- While decision-making, the company must have relied on broad statistics confirming that the purchasing power of Belarusian wages was very low. However, the situation worsens due to the low ability of the enterprises to improve it in recent years. There are no prospects. People do not receive a salary, but an unemployment benefit. Although, it is registered differently.

Dozens, even hundreds of state enterprises are unprofitable. They produce to stock. Even if they produce some products, they can't sell them. They miss both opportunities to develop and pay salaries to their employees from their funds!

These enterprises are not able to ensure the growth of wages neither at the expense of their efficiency, labour productivity, nor any other way. It is a vicious circle that captured hundreds of enterprises driven into the abyss by incompetent management.

It has been lasting for a long time. In recent years, the set of problems has become completely unsolvable for the current authorities.

That is why Belarusians have to get miserable wages, which are decreasing in terms of purchasing power and hard currency equivalent, as well as in comparison with the constantly growing incomes of our neighbours - Poles, Lithuanians and Latvians.

It has come to the point that the enterprises cannot pay even such a pittance in the economic system created by the current authorities. In the Hrodna region, one of the enterprises of the building industry (according to the workers) gave a miserable advance of 10-15% of the salary only after the threat of a strike in February. How can people with families survive for two weeks on 50-70 rubles? The only way is to take credit for food. It is obvious.

The number of clients of Statusbank will grow

Does the current government have any reserves? How can it try to improve the situation that terrifies the Belarusians?

- The trend is still sad both for the government and Belarusians - wages are falling. In January 2020, accrued (gross) salary amounted to 1118.1 rubles ($527.7 at the average monthly rate of the National Bank), while in January 2021 - 1290 rubles ($502.6). Even the data of Belstat confirm that the neighbours of Belarusians receive 1.5-2 times more. But this is "the temperature in the hospital, including the morgue and intensive care unit". The median one is much lower.

Besides, many industries demonstrate a dramatic fall in wages compared to January 2020. In transportation, tourism, catering, hotel business, wages have dropped by 30%. Tens of thousands of people were fired. These Belarusians, unlike their neighbours, received no real assistance from the government. They are the very potential clients of Statusbank, forced to buy food on credit.

More importantly, I foresee an even high drop in the incomes of Belarusians.

IT specialists and the sowing time

- What is a source for the economy to develop? Yesterday, it was the IT sector; today, it is being destroyed and will no longer be an engine pulling our economy. The fall of the entire Belarusian economy will automatically cause a fall in the incomes of the country's population.

One should remember that VAT, which has increased in many areas and groups of goods, is a direct tax for replenishing the treasury. Hence, the government decided to replenish it by imposing higher taxes. The decree of the Council of Ministers № 100 is a fig leaf, which damper the growth of prices for 62 food products and 50 medicines? It proves that the authorities are aware of the rapid growth of prices stipulated by their decisions to double VAT and raise other taxes.

What is the conclusion? Given the accelerated growth of the prices for a wide range of goods (mainly due to VAT growth) and the washout from the shelves of stores and drugstores of the products and medications specified in the list, the Belarusians will worsen their position.

The economy has no foreseeable prospects. I do not see grounds it can stand on and where the current authorities are going to get money for salaries and pensions.

Moreover, the sowing time is coming. Last year, it took 1.8 billion. This year, it will require more than Br2 billion.

What does the government of Belarus have money for? For the salaries of the power block. What about social programs, pensions? If the government counts and voices the rosy prospects of repayment on existing public loans using Prime Minister Raman Halouchenka, why does it hold out a tin cup in front of the Kremlin?

It is clear and scary that the financial resource of Belarus is exhausted. The economy is ruined, small and medium business is ostracized and condemned to the "extreme penalty".

Hope for intelligence, savings, and self-organization

What will happen to wages and incomes? What should Belarusians expect?

- It is quite possible that the authorities will do their best to issue more and more rubles, while the National Bank (as long as it is chaired by Pavel Kallaur) will do its best to prevent this vicious practice.

The point is that how much resource he has, personal. How long will he be able to restrain these intentions? After all, contrary to his policy, the printing press began to work in the second half of 2020. The money was spent on chronically loss-making state enterprises.

I stress now is not the time to talk about the real growth of income. Given the growing prices for food and other goods, the nominal increase in wages by a few per cent will not be enough even to maintain the previous situation.

Decree No. 100 proves that every Belarusian is becoming impoverished.

It's mainly stipulated by growing prices. The budget that is bursting at the seams must receive its VAT. The higher the price of goods, the more this tax. No one can hide from it. Other sources can provide even lower replenishment of the budget.

The second reason is the nominal (albeit symbolic) growth of wages. The direct reason for that is the switching on of the printing press amidst a large number of loss-making enterprises.

As a result, the whole basket of currencies - the dollar, the euro, and even the Russian ruble - will rise.

If the economy continues to operate in the same way - enormous budget funds go to loss-making enterprises - it will lead to its complete collapse.

The Belarusians should be ready to survive at the expense of their savings, intelligence, self-organization.