Anew focus on stocks

On October 9^th, Lukashenko warned of criminal liability for fiddling with stocks.

Inflated GDP growth plans in 2013 have resulted in various methods and sources being used to achieve the desired results. Enterprises have produced unclaimed goods, which have replenished stocks, and worsened their financial situation. The state’s instruction to reduce stocks has resulted in real data being fiddled. Instead of improving the situation, it has exacerbated the problem.

In 2013, GDP growth was projected at 8.5%. The lack of real sources for growth against the background of a high comparison base line in 2012 has resulted in the use of underhanded means to meet the projected indicators: the calculation methodology has been changed, capital investment has been included and goods have been manufactured in volumes which do not correspond to real market demand. Consequently, the numbers look more or less as desired, but they no longer reflect the real economic picture.

In January – April 2013, production stocks increased by 50.3% or USD 3.85 billion. All Belarusian industries have been building up stocks, particularly agricultural machinery and truck manufacturers. The main export market for these products is Russia, which saw a decline in investment demand. Consequently, its market capacity has narrowed and Belarusian sales have fallen. The enterprises could not adjust their production plans and so goods have been piling up at warehouses, current assets have been frozen, and there is even more need for loans to continue operations.

By mid-2013 the situation was unequivocal. GDP growth had proven unattainable. If production continued to grow, it would have led to greater financial burden and declined budget revenues. There was a currency deficit on the foreign exchange market, while assets were frozen in stocks, increasing the pressure on the Belarusian ruble.

The government ordered warehouses to be unloaded. Russian market demand has not recovered. Warehouses needed to be unloaded otherwise top-managers could have lost their jobs. Enterprises showed stock volume inside Belarus, but not at dealers’ warehouses in Russia and other countries. Predictably, foreign receivable debt has increased for machinery and equipment manufacturers. Throughout May-July 2013 foreign receivable debt in the industry grew by more than USD 200 million, meaning that producers, following orders to unload warehouses, had shipped goods to their export dealers’ warehouses. As a result, export figures had improved and domestic warehouses had been unloaded. But there were no foreign currency inflows.

And so, while the short-term problem with stocks has been solved, numerous additional problems have been created for the medium term. As a result, the country’s leadership is outraged and eventually will adopt administrative decisions if the situation does not improve by late 2013.

The entire situation with the stocks stems from unrealistic GDP growth plans. A potential way out from this situation would be discount sales of all stocked goods and adjustment of economic development plans.