Pric­ing Pol­icy: Prob­lems and So­lu­tions

The dif­fi­cult pric­ing sit­u­a­tion on the coun­try’s consumer mar­ket is only tem­po­rary

Economy of Belarus - - CONTENTS - Igor FOMIN

The dif­fi­cult pric­ing sit­u­a­tion on the coun­try’s consumer

mar­ket is only tem­po­rary

Rea­sons Be­hind Sky­rock­et­ing Prices

Ac­cord­ing to the National Sta­tis­tics Com­mit­tee of Be­larus, in Jan­uary-july 2011 consumer price in­dex reached 141%, CPI for foods stood at 141.6%, non-foods 152.3%, ser­vices 123.1%.

The price growth has been caused by ex­ter­nal fac­tors to a con­sid­er­able de­gree. Ac­cord­ing to of­fi­cial in­for­ma­tion of the In­ter­na­tional Mone­tary Fund, in July 2011 global prices for high-qual­ity wool, cotton, rub­ber (gum), leather, sun­flower oil, rape­seed oil demon­strated the high­est growth in com­par­i­son with the

this year’s pric­ing sit­u­a­tion on the coun­try’s consumer mar­ket is a re­sult of sev­eral fac­tors, pri­mar­ily ex­ter­nal ones. Be­larus is an open econ­omy. Price hikes on global mar­kets of raw ma­te­ri­als and com­modi­ties spur the growth of prices and tar­iffs on the home mar­ket.

pre­vi­ous year. As a re­sult, prices for the raw ma­te­ri­als Be­larus buys rose con­sid­er­ably. The sharp in­crease in prices for im­ported fuel and en­ergy re­sources played their part, too.

Mone­tary fac­tors – de­val­u­a­tion of the Be­laru­sian ru­ble and de­val­u­a­tion ex­pec­ta­tions – are an­other es­sen­tial rea­son be­hind the sky­rock­et­ing prices on the home mar­ket this year. They have af­fected both im­ported consumer prod­ucts and Be­larus-made prod­ucts due to the higher im­port com­po­nent in the prices of the lat­ter.

With a con­sid­er­able share of imports in prime costs of prod­ucts (59% in Jan­uary-july 2011), Be­laru­sian man­u­fac­tur­ers had to com­pen­sate for higher costs with higher prices. In Jan­uary-july 2011 in­dus­trial pro­ducer price in­dex to­taled 158.8% (109.1% in Jan­uaryJuly 2010).

The un­cer­tain currency mar­ket has forced im­porters to set higher prices to com­pen­sate for pos­si­ble ex­change rate risks.

In ad­di­tion, do­mes­tic re­tail prices have been af­fected by the in­creased de­mand for Be­laru­sian prod­ucts in neigh­bor­ing coun­tries due to con­sid­er­able dif­fer­ences in prices. The for­eign de­mand has put es­sen­tial pres­sure on the avail­abil­ity of Be­laru­sian prod­ucts on the home mar­ket and has pre­de­ter­mined the need to raise prices for the food prod­ucts, which are sub­ject to reg­u­la­tions.

As for com­modi­ties that are not cov­ered by state pric­ing reg­u­la­tions, in re­sponse to the in­creased de­mand Be­laru­sian man­u­fac­tur­ers raised prices for their mer­chan­dise. In Jan­uary-july 2011 prices for re­frig­er­a­tors went up 64.9%, vac­uum clean­ers 57.2%, fur­ni­ture

41.7%, some food­stuffs, in­clud­ing pop­u­lar oat flakes Her­cules, 75%.

This year the govern­ment has taken de­ci­sions to reg­u­late prices tak­ing into ac­count the fol­low­ing fac­tors:

ag•higher prices for ri­cul­tural raw ma­te­ri­als brought about by higher prices for the ma­te­rial and tech­ni­cal re­sources that agri­cul­ture uses, the need to com­pen­sate for ex­penses of pro­cess­ing enterprises, the need to re­duce the dis­par­ity of prices be­tween Be­larus and the neigh­bor­ing coun­tries, and the need to pre­vent un­or­ga­nized ex­port of consumer goods have ne­ces­si­tated higher pro­ducer and re­tail prices for sta­ple foods;

• the need to re­duce cross-sub­si­dies and bud­get sub­si­dies, to turn round enterprises has ne­ces­si­tated an in­crease in prices and tar­iffs on cer­tain kinds of reg­u­lated ser­vices.

In or­der to slow down the growth of prices for main foods and non­foods and to pre­vent the short­age of com­modi­ties on the home mar­ket due to price dif­fer­ences in Be­larus and the neigh­bor­ing coun­tries the govern­ment has taken sev­eral prompt mea­sures to sta­bi­lize the consumer mar­ket. In par­tic­u­lar, the list of sta­ple goods, prices for which are reg­u­lated by the govern­ment, has been ex­panded. Trade markups for the bulk of foods have been lim­ited to 12-30%. Re­stric­tions on the ex­port of cer­tain com­modi­ties have been put in place to al­low Be­laru­sians to buy them at ex­ist­ing prices. The govern­ment is keep­ing a close eye on prices for sta­ple foods and non-foods. Mo­nop­o­lies are un­der sys­temic con­trol.

To­wards Rea­son­able Prices

The re­duc­tion of ad­min­is­tra­tive reg­u­la­tion of prices and fur- ther im­prove­ment of pric­ing reg­u­la­tions are the most im­por­tant ar­eas of the govern­ment’s pric­ing pol­icy.

These ef­forts are part of the work to carry out Be­larus Pres­i­dent Di­rec­tive No. 4 “De­vel­op­ment of en­trepreneur­ship ini­tia­tive and en­cour­age­ment of busi­ness ac­tiv­ity in the Repub­lic of Be­larus” of 31 De­cem­ber 2010, the treaty on com­mon prin­ci­ples and com­pe­ti­tion rules for the sake of form­ing the Sin­gle Eco­nomic Space.

In par­tic­u­lar, sev­eral reg­u­la­tions have been adopted to im­prove the ex­ist­ing pric­ing sys­tem through lib­er­al­iz­ing en­tre­pre­neur ini­tia­tive, im­prov­ing the coun­try’s in­vest­ment cli­mate, and rul­ing out the in­ter­fer­ence of govern­ment agen­cies in pric­ing prac­tices of eco­nomic en­ti­ties.

Be­larus Pres­i­dent De­cree No. 72 of 25 Fe­bru­ary 2011 sys­tem­atized ap­proaches to­wards pric­ing reg­u­la­tions, clearly defin­ing its area of ap­pli­ca­tion. Eco­nomic en­ti­ties are free to set prices for prod­ucts and ser­vices not on the list.

Tak­ing into ac­count the pol­icy to­wards op­ti­miz­ing eco­nomic op­er­a­tion terms and the ap­proaches set by Di­rec­tive No. 4 it is un­der­stand­able that the en­force­ment of ad­min­is­tra­tive re­stric­tions on prices can lead to a re­verse ef­fect while prices on global mar­kets are on the rise and the coun­try’s currency mar­ket is in a dif­fi­cult sit­u­a­tion. Such re­stric­tions can de­te­ri­o­rate the sta­tus of eco­nomic en­ti­ties, re­duc­ing pro­duc­tion and im­port of cer­tain com­modi­ties, re­sult­ing in their short­age, growth of shady trade op­er­a­tions and other neg­a­tive con­se­quences. In this sit­u­a­tion it is im­por­tant to keep pro­cesses on the consumer mar­ket man­age­able and to pre­vent the price sit­u­a­tion from get­ting out of hand.

It is worth not­ing that ex­ist­ing prob­lems are tem­po­rary. Their ef­fect will grad­u­ally sub­side as the eco­nomic sit­u­a­tion grows more sta­ble, pri­mar­ily through the sta­bi­liza­tion of the Be­laru­sian ru­ble ex­change rate, re­moval of mul­ti­ple ex­change rates and the re­sump­tion of the abil­ity of eco­nomic en­ti­ties to freely buy for­eign currency, and the sat­u­ra­tion of the home mar­ket with com­modi­ties. It will be fos­tered by a co­or­di­nated pol­icy on pric­ing and tax reg­u­la­tions, in­comes and salaries, an­timonopoly laws, sat­is­fac­tion of the do­mes­tic de­mand thanks to pur­chas­ing in­ter­ven­tions and com­mod­ity in­ter­ven­tions among other things.

In July 2011 the Slutsk su­gar re­fin­ery reached the su­gar out­put land­mark of five mil­lion tonnes

A new un­der­wear man­u­fac­tur­ing en­ter­prise has been opened in the town of Ushachi, Vitebsk Oblast. OOO Pa­tolya em­ploys 43 peo­ple. In July alone the new en­ter­prise turned out Br45 mil­lion worth of com­modi­ties

OAO Mogilev Khimvolo­kno boasts the CIS’ only non­wo­ven fab­ric man­u­fac­tur­ing line

BELAZ quarry trucks

are well-known in Rus­sia and many

other coun­tries across the globe

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