World Bank urges Belarus to cut inefficient public sector

Belarus needs structural reforms, as the traditional sources of economic growth have been exhausted. This was stated by the head of the WB office in Minsk, Alex Kramer, in a video address on the World Bank website.

According to him, the structural changes will allow Belarus to become “stronger, more prosperous and economically independent”. However, the economist admitted that a serious transformation would be difficult.

The head of the WB representative office stressed that the traditional sources of growth of the Belarusian economy like “borrowing from abroad, rising commodity prices and rapid economic growth in neighboring Russia” have been exhausted.

Some enterprises need to be to sold, some need to be closed

The main problem of Belarus is the inefficiency of state enterprises. Thus, the net profit of state-owned enterprises decreased from 5.3% of GDP in 2013 to 1.5% of GDP in 2018, while the share of loss-making state-owned enterprises increased from 7.7% to 12.9%. Also, the public debt has increased significantly due to the fact that Belarus has taken loans abroad, partly to cover losses of state-owned enterprises.

According to the WB representative, some state-owned enterprises should be privatized at market prices, while others should be closed down. To reduce the negative effect of the closure, he believes, it is necessary to provide dismissed workers with the opportunity to receive sufficient unemployment benefits.

Alex Kramer stressed that dismissed employees could go to work for private companies, but this requires getting rid of the unequal attitude of the state to private and state-owned enterprises. Also, he added, the rule of law should be applied predictably and consistently. If these changes are implemented, the inflow of private investment and creation of jobs in private business will begin to grow, said the representative of the World Bank.

We need to sort out subsidies for heating

Also, in his opinion, it is necessary to sort out subsidies for heating. The situation when families pay only 15.6% of its total cost and the rest is paid either by the enterprises at higher tariffs or by the state at the expense of subsidies reduces the competitiveness of enterprises and requires constant public spending for such subsidies, he believes.

It is possible to make sure that poor and socially unprotected families do not suffer from the increase in heating tariffs by expanding the existing program of subsidies for housing and communal services, said Alex Kramer.