Belarusian population will bear burden of solving budget deficit problem in 2016

As of mid-April 2016, Belarusians will have to pay the customs duty if they receive an international pouch worth more than EUR 22. By introducing such a restriction, the government is attempting to boost sales from official importers and increase budget revenues. Increased costs will prompt the population to sell more currency, thereby helping the state to service the public debt and maintain the economy.

According to the Decree No 40 of February 11th, 2016 a person shall not be liable to pay customs duties if he or she receive an international pouch containing goods for personal use worth up to EUR 22 once a month in a year. Previously, the upper margin for such pouches to be excluded from customs duties was EUR 200. The Decree does not apply to parcels sent within the EEU. In addition, the Decree has restricted imports of goods by road and rail: a person is liable to pay customs duties if he or she imports goods worth over EUR 300 more frequently than once every three months.

The Decree No 40 is aimed at restricting the currency outflow from Belarus and increasing budget revenues from official importers of goods. In 2015, the volume of cross-border purchases could have exceed USD 100 million, making budgetary losses from the non-payment of VAT over USD 20 million and curtailing the state’s aspirations for additional revenue from the income tax. In 2015, sales of domestic clothing have declined by 15.7% and knitwear by 3.7% compared with 2014 mainly due to increased online orders on foreign web sites.

By reducing the duty-free import margin, the state aspires to increase household spending, and primarily foreign currency savings. As of March 2016, tariffs on communications services will increase, tariffs on some public services will threefold. By mid-2016, the state aims to cut subsidies for housing and utilities costs to 50%, compared with 67% in late 2015. In addition, the government is considering raising the excise tax on fuel and tobacco.

As of February 1st 2016, people’s currency savings in banks alone totalled more than USD 8 billion. Currency savings outside the banking system were estimated several USD billions more. If people start spending their currency savings on current consumption inside the country, the state will be able to repay its public debt and preserve the exiting inefficient economic model. In addition, the state is likely to seek new ways to impose additional dues on citizens.

Overall, amid economic recession, the state has restricted citizens’ access to low-cost imported consumer goods. As a result, the population will have to spend more on current consumption and will be prompted to spend its currency savings, while the state is likely to use this opportunity to maintain the Belarusian economic model.

Photo: RIA