Rise in Belarus minimum wage in regions to BYN1000 by late 2019 seen leading to devaluation

Rise in Belarus minimum wage in regions to BYN1000 by late 2019 seen leading to devaluation
Belarusian president Alexander Lukashenko ordered minimum wages be increased to BYN1,000
By bne IntelliNews August 16, 2017

Belarus president Alexander Lukashenko is on a drive to improve the quality of life for his citizens but is going about it old-school style.

This week he was on a tour of factories and ordered that salaries at low-paying enterprises should be raised. The problem is that previously when he simply ordered salaries to go up in the past all that did was lead to inflation and resulted in a painful currency devaluation.

The country's leadership has instructed the local authorities to raise minimum wages at enterprises by the end of 2019 to BYN1,000 ($515), which would lead to an increase in the average wage in the economy as a whole to BYN1,500.

“The average salary in Belarus will reach BYN1,000. Certain enterprises are doing their best to increase salaries, and it is good. However, about a half of all enterprises or maybe a bit fewer have small salaries. Our main objective is to help those enterprises raise their salaries to BYN1,000 in 2018-2019, especially in 2018,” Alexander Lukashenko said.

In his words, if this instruction is fulfilled, “the average salary in the country could reach BYN1,500,” the president said on a trip to Brest, reports BelTA.

The pace of wage growth in 2017 is insufficient to ensure payroll at BYN1,000 by late 2017 without manipulating statistical indicators, according to economists.

In order to fulfil the president’s order, the government would have to increase budgetary expenditures on wages in healthcare and education, while enterprises would need to carry out further layoffs and expand the practice of taking loans to pay wages and restrict investment in modernisation of fixed assets.

In 2010, the artificial increase in wages led to a three-fold devaluation in 2011, an increase in the average salary to BYN1,500 will not match the capabilities of the economy and could lead to yet another devaluation, say experts.