Anti-corruption fight – Lukashenko’s response to greater economic and political risks

On August 1^st, President Lukashenko held a meeting on effective measures to fight corruption and economic crimes.

The country’s deteriorated financial performance and related budgetary and electoral risks force President Lukashenko to strengthen efforts to combat shadow economy and corruption. Simultaneously, Lukashenko has to maintain close relations with the security forces, due to his great dependence on them.

Continued production decline in the country, as well as a number of recent negative events (failure to agree on untied loan from China, BPC collapse, etc.) force the country’s leaders to improve measures against shadow economy in order to increase state budget revenues. In Q1 and Q2 2013 national budget revenues made 41.2% of the planned against 45.1% in 2012. Income tax plan in January – June 2013 was fulfilled by 32.9% compared with 70.3% in 2012.

Tax Minister Poluyan said that shadow economy in Belarus accounted for 8-10% GDP, “we need to take the maximum from the share which belongs to the state budget”, the Minister said.

President Lukashenko demanded to strengthen anti-corruption measures, in particular at regional and district levels, where conditions were more favorable for long-term malicious cooperation between local authorities, business and security forces.

On the one hand, Lukashenko’s increased attention to anti-corruption measures is conventionally associated with the upcoming presidential election campaign. However, characteristic of this period is that since 2011 Belarus’ law enforcement agencies were increasingly gaining negotiating authority. The number of law enforcement agencies has increased, as well as the scope of their authority has expanded. For example, potash exports and construction are supervised by the KGB, Information Technology industry – by Operational and Analytical Center.

Objectively speaking, President Lukashenko has to pay greater attention to the law enforcement agencies and to expand the scope of their work. In particular, during the recent anti-corruption meeting, it was agreed to submit inter-ministerial anti-corruption reports to the President by quarterly. Increased cooperation with the security forces is also meant to guarantee Lukashenko’s safety (for sure he is preparing to win the upcoming presidential elections).

On the other hand, Belarusian authorities try to solve a tactical problem – to increase budget revenues – by neglecting strategic perspective related to the economic climate improvement. Better effects could have been achieved if objective reasons for the shadow economy’s growth were eliminated: tax laws simplified and its stability was guaranteed, the number of supervisory bodies and inspections cut down.