Opinions & Interviews

Kirill Rudyi is the chairman of the interagency commission on economic security under the Security Council. The official gave an evaluation of the country’s expected development scenario for 2015 that had been presented by the government and the National Bank.

The official classified the next year’s expected increase in prices for raw materials as optimistic.

Kirill Rudyi also drew attention to inflation and the cost of loans. “The cost of loans exceeds the profitability of enterprises by three times. Debts of industrial enterprises exceed the industrial output by five times. As a result, the number of loss-making enterprises is on the rise and differences in exchange rates cannot be blamed for it. For instance, in January-September losses of Bobruiskagromash amounted to Br41 billion while Br68 billion was spent on servicing loans,” noted the Aide to the President of Belarus.

In his opinion, interest rates on loans cannot be higher than profitability. “In other words, the interest rate on loans for the production sector cannot exceed 10%, which means that inflation cannot exceed 9%. And it is not a liberal proposal. The introduction of monetary dictatorship is likely to be suggested. Voices have been heard in favor of prioritizing the reduction of inflation to the annual average of 9% and even lower than that afterwards. It is quite feasible,” believes Kirill Rudyi. He remarked that to accomplish that it is necessary to control the money supply and possibly revise a number of government programs in order to reduce their spending.

The Aide to the President suggested saving on projects with long payback periods. The start of the construction of new facilities may be delayed, the construction of homes using state support can be reduced. “Apart from that, it is necessary to influence free prices, which does not mean they are not regulated, it is necessary to counteract price collusion, monopolies and protect competition,” stressed Kirill Rudyi.

“At the same time it is important to take into account the influence of devaluation on inflation,” said the official. “In Belarus every percent of devaluation results in a 0.5% increase in prices. Our main exports (41%) are oil products and potassium. Prices for them are independent of the exchange rate of the Belarusian ruble. The positive effect from devaluation for exports other than raw materials is negated by an increase in prices for imported components. Therefore, the advisability of devaluation for the entire economy, not individual enterprises is questionable”.

Kirill Rudyi suggested considering the development of a two-year program to reduce inflation to the annual average of 9%, with its execution rigidly monitored on a quarterly basis.

Various points of view regarding the forecast of the country’s future development were voiced and thoroughly discussed during the government session.