Normalisation of settlements in agriculture will reduce bad debts on wages in Belarus

As of September 1^st, circa 68,000 people did not get paid in a timely manner. In July, the situation with wage arrears somewhat improved after agricultural enterprises received funds from the state budget. Without financial reform in agriculture, wage arrears will remain and will require further funding from the state budget.

The National Statistics Committee reported that as of September 1^st, 2015, wage arrears in Belarus totalled BYR 276 billion or 1.4% of the July payroll. 432 organisations had wage arrears to their employees and 68,000 workers were not paid on time. Of the total wage arrears, 72% was in agriculture. The bulk of the debt had accumulated in Minsk and Vitebsk regions.

In July, the volume of overdue wages decreased by BYR 55 billion. The decrease was mainly due to agriculture. The state has allocated substantial funds in support for the harvesting campaign, which has somewhat reduced wage arrears and allowed to repay debts to contractors. As a result, the number of agricultural organisations with wage arrears in July 2015 fell from 386 to 345.

Agriculture is among the lowest paid economic activities. The average wage in the industry in July 2015 stood at USD 350, which was 24% below the average in the country. Despite this, agriculture is the main generator of wage arrears. Without state support, only a third of agricultural enterprises are profitable. Agricultural enterprises delay payments for goods and services to other economic sectors, which undermines financial health of their suppliers. A chain of non-payments in the economy thus is usually due to some agricultural organisation.

A possible solution for this problem could be ending malicious practices when state sets low prices for agricultural products, re-orienting production on more profitable agricultural crops depending on geographical location, and strengthening private capital presence in this area. Nevertheless, the state is likely to retain control over the industry under the pretext of ensuring the country’s food security. However, it may gradually cut subsidies to the industry due to the lack of budgetary funds. Wage arrears are likely to be repaid during the harvest season and before the end of the financial year, in December, from accumulated budget surplus.

Agriculture is the main generator of wage arrears in the economy. The state is not ready to give up control over agriculture and wage arrears are likely to be repaid during the harvest season and from accumulated budget surplus in the end of the financial year.