Belarus topped the anti-rating among the EAEU countries in terms of rising prices for agricultural products. As follows from a report published on the website of the Eurasian Economic Commission, in February 2023, prices increased by 0.1% compared to January, and by 19.7% compared to February last year. And this despite the fact that over the past year, agricultural production increased by 3.6%.
The most noticeable increase in prices – almost 23% – was demonstrated by livestock products. Although the government has repeatedly pointed out that in Belarus “food security is at a high level”, and, in particular, we provide ourselves with meat and milk completely on our own, and even for export.
It turns out that the strict state regulation of prices, which has been in force in the country for half a year, does not help? Why did prices rise so noticeably in a seemingly “agrarian country”, and is it possible to improve the situation in the current conditions, Owl discussed with an entrepreneur, a former government official Nikolai Lysenkov.
“Even from the report under consideration, it is clear that of all the neighboring countries Belarus has the most command economy, and all prices are really regulated by the state. Even if it is not economically justified, but politically beneficial, the price will be kept at the level at which, relatively speaking, it was fixed by the order of the government,” the entrepreneur says. This practice has evolved over the years. And since in the last ten years we have experienced a shortage of foreign exchange earnings, a lot of Belarusian agricultural products are exported at low prices.
And in order to somehow get out, the enterprises asked to be allowed to sell their products at least to the domestic market at a higher price in order to compensate for the costs of exports.
Today is the second year that our country is under serious sanctions, and intermediaries take advantage of this (because products from Belarus are not exported directly from the manufacturer to the consumer). Understanding that state-owned enterprises have no particular maneuver, because they cannot but produce or sell products – they have an order to provide foreign exchange earnings – intermediaries “twist the arms” of the heads of these enterprises so that they reduce prices. Those, respectively, are forced to make concessions.
In recent years, this has become even more noticeable, and compared to the main competitors, the prices for Belarusian agricultural products for export have fallen significantly. Well, since you won’t constantly work in the red, working capital will also be washed away, the state supported such enterprises: it issued some soft loans, funds were invested in equipment modernization, etc.
Today, Nikolai Lysenkov notes, “the gold reserves of Pan Ataman” have become significantly scarce, and there is no money in the budget even for significant support for the power bloc. What can we say about agriculture, to which funds reach the residual principle.
In order to cover the losses of exports, producers were forced to raise prices in the domestic market. That is, by receiving foreign exchange earnings and providing huge profits to foreign intermediaries, we pay for this – consumers who buy products in stores.
– Such a significant increase in prices, in your opinion, occurred mainly “due to” the fact that domestic producers overestimate them, or was it influenced by imported products that officials cannot influence much, but are forced to buy?
– Belarusian officials are balancing between the economic component and the political one: first of all, everyone is forced to “love the president”, who supposedly gave us cheap products, and only then to make a profit. Plus a command economy.
In addition, all over the world food prices have risen in recent years due to the coronavirus pandemic and the economic policy of the largest central banks.
Another thing is that in the same Europe, energy resources have risen in price (conditionally, two years ago they bought a thousand cubic meters for $200, and last year, there was a period when the price exceeded the mark of $2,000) – therefore, for example, cucumbers have risen in price. And why they have risen in price in Belarus, it is difficult to say: we bought gas for $120, and we buy it.
Most likely, the government does not have subsidies to support domestic producers and processing enterprises – and those, in order not to go bankrupt at all, raise prices, with the consent of the authorities, only so that it is not sharp and not too noticeable.
– There was a very revealing story with cucumbers, when there were not enough of our own, and import prices were shocking. And then Prime Minister Roman Golovchenko justified himself, saying that within a few years we would solve the issue of providing cucumbers in the off-season, went with an inspection to the greenhouse facility, promising to modernize and build new ones to provide vegetables at affordable prices.
Why such a belated reaction, if the problem is not the first year?
– So the promises are not the first year. They promise to modernize greenhouses, open new ones every five years. Lukashenka says every year: I set the task – to feed and produce for export. Here, I repeat, the political component is more important, the main thing is to promise.
Every time there is a new electoral campaign, we see this populism and promises. It is not necessary that we begin to live better, the main thing is that people think that there is progress. And it turns out, as in a joke: “You have already been promised so much, but you are still not enough!”.
Therefore, the fact that Golovchenko now announced the need to develop the industry is how Lukashenka spoke about it twenty years ago. And it seems that they even allocated some money, and then let it go on the brakes.
The industry, of course, is developing – it has not remained in the same positions as 20-30 years ago. But this development is so slow that our neighbors are overtaking us with a vengeance – they were already ahead, and now they are moving even further ahead. Therefore, sometimes it seems that we are marking time, and in comparison with our neighbors who are successfully developing, it seems that we are completely rolling back.
Is it possible to somehow improve the situation, for example, by abandoning the collective farm model in favor of the farmer, or is this unrealistic in the current situation and the conditions of sanctions? According to Nikolai Lysenkov, the Belarusian authorities cannot create conditions for progress – only for its appearance.
– The government is afraid to give money to private traders, but it invests in unprofitable collective farms and processing enterprises. If some of the private enterprises receive state support, then, I think, it is targeted and thanks to personal ties with officials.
If such support, subsidies were given to farmers, they would have absorbed the collective farms long ago. But, unfortunately, we do not observe the Constitution, which clearly spells out the equality of property rights. And if you imagine that they will allocate funds in support, then not on the same conditions as for state-owned enterprises (the unprofitable collective farm did not pay off debts – they were written off), but they will demand to return them a year ago.
Compare how it happens in the countries neighboring Belarus: funding is free, and it is distributed to everyone, only produce products.
Therefore, until the authorities change their approach to this topic, there is no need to talk about improving the situation. This is not possible in a command economy. And the Belarusian regime will not agree to structural reforms.
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