The money printing press is on again

The government raises salaries to budget organizations employees by 20% and solves the problem of liquidity of the two largest state-owned banks by emission. Therefore, an ambitious goal to reduce the inflation to 20% from the very beginning of the year faces serious challenges in the form of loose monetary policy.

Belarus issued long-term government bonds in the amount of Br 4.7 trillion with a one year maturity period. Funds received via the placement of public long-term bonds will be made as monetary contributions to the statutory funds of the “Belarusbank” in the amount of Br 3.9 trillion and the “Belagroprombank” Br 800 billion

Alexander Lukashenko approved the Council of Ministers regulation, which provides for an increase of the tariff rate for the first level workers from Br 151 thousand to Br 200 thousand, or by 32.5% as of 1st January 2012. Also as of January 1, salaries of workers of 1-27 classes will be corrected by 3.72 – 0.92 correspondingly.

In general, the government estimates that increased tariff rates will result in increased wages of public employees by an average of 19.4%. However, it will increase the pressure on inflation, which in turn can be reduced if the authorities increase utility services tariffs significantly.

It is unclear how the authorities intend to achieve 19-20% inflation in 2012, when any liquidity problems of large banks, businesses or the population are resolved through the emission credits.