Meeting to discuss price regulation mechanisms

Price regulation is a matter of social justice, Belarusian President Aleksandr Lukashenko said at a government meeting to discuss price regulation mechanisms on 21 December.

“I want you to understand that you will not kick this issue into the long grass. This is a moral, political, strategic issue. Whatever you may call it. The main thing is that this is the matter of social justice,” the Belarusian leader said. “Talking to [First Deputy Prime Minister Nikolai] Snopkov almost every second day, I tried to explain him that this is a moral issue, a matter of social justice.”

“Let us take for example an increase in milk prices,” Aleksandr Lukashenko said. The main question here is who profits from this increase. It would be good if those were milkers. But the situation was absolutely different. “The State Control Committee reported that these price increases were distributed among those who deserve it the least. Those were not even trade workers, but some owners. They earned at least $35,000 a month on these price hikes,” the head of state said.

“Nevertheless, we have succeeded to some extent in putting things in order. This is a matter of justice. Demand for justice has always been high among the Slavic nations, including in Belarus. We cannot leave this matter behind. This is the number one matter for our people. There is no populism here (I say this to those who will start criticizing us tomorrow). No populism before the election campaign. We have always kept the matter on the radar. Since it has not been resolved, a tough decision has been made,” Aleksandr Lukashenko said.

According to him, the major goal of the current meeting is to see how this process is developing.

The President emphasized that when the government was tasked to deal with the matter more than a year ago, it was not about freezing or even restraining prices. “It was about regulating prices. Prices were restrained across some commodities. Prices went up in terms of others. You cannot fool the economy,” the Belarusian leader said. “We understand perfectly well that prices freeze can create shortages. No one will work at a loss. We kept that in mind.”

“We are addressing this issue openly today. We have gathered the officials that the government proposed. Here are the people who produce the goods (their representatives, I mean ministers), those who sell the goods, people who organize the whole process. Everyone needs to hear what we are discussing. Someone will make decisions, and someone will execute them,” the head of state said.

"Manufacturers, businessmen, traders and others who provide services should not run to the Ministry of Antimonopoly Regulation and Trade (MART), to other ministries or to the government to negotiate prices. Starting from 1 January, we should have a clear, intelligible system of price regulation," the Belarusian leader said.

Aleksandr Lukashenko explained with a specific example: "You have a 3% annual increase across some groups of goods or in general. That's it. You project certain increases in the first quarter, second and third quarters and deflation of 0.1% in Q4. Thus people will understand how to build pricing. There should be a clear, intelligible system."

The President instructed the government to revisit this issue and stressed that the Ministry of Antimonopoly Regulation and Trade should not be engaged in coordinating prices. "Listen, how many people will MART have to employ to monitor and coordinate all these matters? I want the government to revisit the issue, set the tasks for everyone: price controllers, MPs, the prime minister. If there is a need, get me engaged. But the thing must be sorted out," he demanded.

The head of state stated that this year the inflation in Belarus has significantly decreased, including thanks to the measures to regulate pricing. Skeptics argued that such measures could push a number of players out from the market. But the situation is absolutely normal.

"The inflation hovers around 5-6%. We projected 6% or under 7%. At some point it was running as high as 19%. Everyone argued against these measures saying that companies would leave and that there would be no traders left. But we do have those who are doing trade. If some do not like it in Belarus, the door is open, both ways," the Belarusian leader summed up.

First Deputy Prime Minister Nikolai Snopkov delivered a report about the consumer market situation. He stated that in January-November 2023 retail trade turnover rose by 8.2% in comparison with the same period of last year.

“In other words, people shop more often and buy more now. It is the key result,” the head of state noted after hearing these figures.

Meanwhile, profits of Belarusian retailers dropped to no surprise of the government. The decrease in profits was expected and predicted. “It could not have been otherwise because we controlled price markups,” Nikolai Snopkov explained. At the same time the official pointed out that only 137 organizations out of the 714 trade organizations covered by the National Statistics Committee turned out to be unprofitable in January-October 2023, including 105 organizations, which reported losses due to current operations.

“Most of the trade organizations demonstrate financial stability. Despite the fact that we’ve reduced price markups,” the first deputy prime minister stressed. “Price regulations have reduced profits but allow normal operation.”

In response the President advised the government to not particularly worry about falling profits of a small number of trade organizations. “As for their profits, you should not worry about profits of trade organizations,” the President remarked. “Well, they paid slightly less in taxes to the state budget. But it seems to me the budget is doing fine, isn’t it?”

“More than that,” Nikolai Snopkov responded.

“Don’t say ‘More than that’ while talking about it. Well done. Things are good where things are good. Otherwise, our poor fugitive opposition activists will come to their senses, will start crying that they don’t have money while money is here,” Aleksandr Lukashenko said with a bit of humor.

Returning to the topic of price controls, the President stated that initial fears of certain individuals regarding the introduction of state-regulated price controls had not been proven correct and economic indicators prove it. “Nothing happened. We work as usual,” the head of state stressed.

As of 1 December the annual inflation was at the level of 5.4%. This is almost three times lower than the increase which mainly occurred in October 2022. At the time the President set the task of ensuring a reasonable level of prices and made appropriate decisions at the state level. "I emphasize it was not about freezing, but ensuring a reasonable level of prices," Nikolai Snopkov said.

He explained the inflation was influenced by three main factors. The first one was the decisions by government agencies on sectoral price regulation, which accounted for 2.1% of the overall inflation rate.

In 2023, prices and tariffs were increased for excisable goods (tobacco, alcohol), housing and utility services, passenger rail transport, higher and preschool education services.

"We did it where it was impossible to restrain prices," Aleksandr Lukashenko said. “Where necessary, we raised prices. In some cases, we restrained prices. But next year there should be no such imbalance and disparity."

The second factor was the rise in prices for imported goods, mainly from third countries, against the background of exchange rate fluctuations. They contributed 1.5% to the inflation.

"This is imported inflation," Nikolai Snopkov explained. “Everyone knows that we are a country that is actively engaged in export/import operations. Imported inflation has a direct impact on us."

For example, imported medicines and fruits have risen in price by almost 12%, international passenger rail transportation - by 23%, tourist services - by 22%.

In this regard, the President demanded to look into whether the increase in prices for fruits and especially for medicines were justified. "What are we afraid of? That some private pharmacies will leave the market? Let them go! We have enough state-owned pharmacies. In general, the Healthcare Ministry should deal with this," Aleksandr Lukashenko said. The head of state once again drew attention to the need to exclude unreasonable mediation to get fair prices for medicines: "I will tell you how the prices for imported medicines are formed, and you will see how many mediators there are: sons, close relatives and mistresses."

Prices for domestic medicines rose by as little as 2.2% as there are no intermediaries.

The third factor influencing the inflation in the country was the decisions by government agencies to raise prices within the framework of Resolution No. 713. According to Nikolai Snopkov, there were 763 decisions to raise prices and 1,350 ones to set prices for new goods. This contributed about 1% to the inflation. Milk, meat, and clothing have increased in price the most. On the other hand, the prices for cereals, pasta, synthetic detergents decreased (by about 5%).

The increase in prices for most goods has been moderate recently. "For 19 days of December, prices inched up by 0.5%. Basically, this is a seasonal increase in prices for vegetables and imported fruits," Nikolai Snopkov said. "In general, the inflation is projected at 5.4%- 5.6% in 2023." 

In terms of the commodities monitored by the Belarusian Statistics Committee, the prices for 70% of them rise within 4%. If this indicator is examined in conjunction with the goods, the prices for which are regulated by the state, then the growth is 2.7%.

Most goods in Belarus are traditionally cheaper than in Russia, Nikolai Snopkov noted.

"This is a certain risk factor," the President said. “People should understand that if we keep prices even lower and if they raise them in Russia, then commodities will overflow there. We've been through such situations before."

"Yes, they will leave our market immediately," Nikolai Snopkov agreed. "That's why we're trying to balance here."

According to Nikolai Snopkov, consumer activity of the population remains high. “It is fuelled by the economic policy of our state, which has allowed increasing real salaries by over 10%. Adjusted for inflation,” the first deputy prime minister pointed out. “The growth of consumer lending increased by 1.5 times. The growth of real estate loans increased by 60%. Net sales of foreign currency by the population totaled $400 million.”

As a result, the volume of sales in the country has recovered after a decrease in 2022 and primarily sales of durable goods. In January-September 2023 sales of new automobiles rose by 11%, TV sets by 16%, bicycles by 18%, clothes by 58%. Food trade turnover increased by 4.9%, with non-food trade turnover up by 11%, thus allowing compensating for last year’s decrease by two times.

Speaking about pricing and inflation, Aleksandr Lukashenko could not ignore the rise in prices for domestic vegetables, in particular for cucumbers and tomatoes. Back in the spring, the head of state gave an instruction to come to grips with issues related to production of fruits and vegetables in the off-season. In particular, the President suggested building more greenhouses so that Belarusians could be able to buy domestic vegetables all the year round. Yet, the government decided to try to fulfill this task with the least investment. According to Deputy Prime Minister Leonid Zayats, the return has been good: there are sufficient domestic products on the store shelves. Cucumber prices dropped by about 16.5% compared with December 2022.

However, Aleksandr Lukashenko drew attention to the seasonal increase in prices for vegetables. He noted that people are concerned about today’s prices, not last year’s. As statistics show, the measures taken were not enough. “You should produce these cucumbers in sufficient quantities. People want them to be cheaper in the run up to New Year,” the President demanded. “I told you to build 10 more greenhouses. You said that you would install more lighting in greenhouses. So go ahead!”

As Chair of the National Statistical Committee Inna Medvedeva reported, in December prices for cucumbers surged by almost 66% month-on-month. The situation is similar for cabbage, onions, beets, carrots and tomatoes.

“We’ll provide enough light and cucumbers will grow just like that!” Aleksandr Lukashenko said sarcastically commenting on the government’s promises. “Think what steps you should take. Why am I asking this question? I would not have said it some 10-15 years ago as gas and oil were expensive back then. But now there’s enough of everything.”

“Of course, there is room for improvement, and we are aware of this problem,” First Deputy Prime Minister Nikolai Snopkov responded.

“We need to take it up a notch. At least where we can,” the head of state demanded. “Keep in mind, this is our first step to sort out prices. Everything will depend on production, on volumes. We need to ramp up output, especially where we can.”