GOVERNMENT OF BELARUS FOCUSING ON THE 2009 DRAFT BUDGET

At a session of the Council of Ministers on July 15, Prime Minister of Belarus Sergei Sidorsky suggested introducing two new indicators of economic growth. These are the volume of investment per one worker and the volume of innovative and high-technology products in total exports. Sergei Sidorsky stressed the importance of these issues for the economy of the country which has no natural resources and increases GDP by means of high-technology productions. “We have no other way but to boost exports of high-technology goods, therefore we need to project how this process will fare in the future,” he said.

The Prime Minister suggested thinking over and discussing various variants bearing in mind the increase in the prices for energy, metals and other materials used in the Belarusian manufacturing industry. According to him, introducing new indicators will stimulate producers to work more effectively, modernize outdated basic assets, set up new productions. Sergei Sidorsky also said that today “only 42% of business-plans are implemented”. “We need to encourage other companies to implement innovation projects. They need to know what volume of investment accounts per one worker. Then we will see the dynamics,” Sergei Sidorsky said.

The investments will account for 30% of the Belarusian GDP in 2009, Economy Minister of Belarus Nikolai Zaichenko said at the session of the Council of Minister. He noted that the investment in the fixed capital should grow by 23-25% in 2009. Br47-48 trillion from all the sources of financing is to be allocated for the fulfillment of this task. The investment growth is stipulated in the State Investment Programme and five year branch and regional investment programmes.

According to the minister, the total number of objects that will be put into operation in 2009 has been increased by 82 to reach 213. The commissioning of industrial objects will secure an additional growth of 1.9 percentage points in the industrial complex.

The state support for the investment projects that won the competition will remain in place. The recipients of this support will receive bank credits on preferential terms. Br54 billion will be allocated to finance these projects. The 2009 draft budget will allocate Br20 billion for the implementation of the innovation projects.

According to the Economy Minister, the legal framework for the entrepreneurship development should be elaborated. In 2009, the state policy in the area of small business will be aimed at increasing the role of small business in the development of economy through its deeper involvement in the production and service sectors, as well as through the invigoration of investment, innovation and export activities.

Nikolai Zaichenko added that apart from the improvement of the investment climate, measures are undertaken to develop new regulations to stimulate the industrial production, develop corporate securities insurance market and venture activities. The legal support for the technology transfer will be enhanced. The privatization will be boosted.

In 2009, the rate of export growth will exceed the GDP growth by 6.5-7%. According to Economy Minister of Belarus, in 2009 the gross domestic product in Belarus is prognosticated to increase by 10-12%. Exports are expected to grow faster. “Favourable trends are projected to remain in place for domestic exporters in 2009,” Nikolai Zaichenko said. Next year the import of goods and services is to up by 15.5-17% (taking into account the expected increase in energy prices).

In 2009, a foreign trade deficit is prognosticated at the level of $1.47-1.5 billion.

The tax burden in Belarus in 2009 will be reduced by 1.3% of GDP, or Br2 trillion, First Deputy Finance Minister Andrei Kharkovets said at a session of the Council of Ministers which focused on the 2009 draft budget on July 15.

According to him, next year the duty to the national fund of support of agricultural producers will be decreased from 2% to 1%. The move will help companies boost their turnover assets, increase the competitiveness of Belarusian goods in foreign markets and step up exports. As a result of this move, tax payers will retain Br1.4 trillion in their budgets.

In 2009 real estate tax will not be levied on productive assets (tools, equipment). As a result of this measure, the tax burden will go down by Br412 billion.

According to Andrei Kharkovets, in 2009 single rates of local tax on retail sales and services will be introduced at the amount of 5% of profits.

An important measure to reduce the tax burden will be reducing the tax on purchasing transport vehicles from 5% to 3%. The cutting down of the rate of mandatory insurance premiums to the social security fund from 35% to 34% shall act as an additional stimulus to increasing wages, Andrei Kharkovets said.

The deficit of the consolidated budget of Belarus in 2009 is projected to make up Br2.8 trillion, or 1.8% of GDP, First Deputy Finance Minister Andrei Kharkovets said at a session of the Council of Ministers. In 2009 the revenues are prognosticated at Br71.9 trillion, expenditures Br74.7 trillion.

According to the 2009 draft budget, Br8.7 trillion will be assigned to finance 56 national programmes, up almost 30% from 2008.

A priority in the expenditure policy will be to ensure the growth of wages in the budget-covered sectors to increase wages to $700 in equivalent by the end of 2010. By the end of 2009 wages in the budget-covered sectors are expected to average $550.

In 2009 the expenditures on health care will be up 34.7% from 2008 to Br6.5 trillion, on education 36% to Br8.8 trillion. Defence expenditures will up by 37% to almost Br2 trillion.

Andrei Kharkovets noted that in 2009 additional expenditures will be secured in the budget in connection with increasing costs of energy imports. Thus Br1.7 trillion will be assigned to subsidize utilities companies.

In 2009 the exchange rate of the Belarusian ruble against US dollar will fluctuate between Br2,000 and Br2,200 per $1 within a band depending on the situation in the country and abroad, Chairman of the Board of Directors of the National Bank Piotr Prokopovich said.

According to him, the exchange rate policy is aimed at maintaining the financial system, stabilizing the national currency.

Piotr Prokopovich also informed about the gold and foreign currency reserves plans. They are projected to increaser by at least $2.25 billion to reach no less than $10 billion by 2010.

Today Belarusians borrow more from banks, Chairman of the Board of Directors of the National Bank Piotr Prokopovich said.

“This is a normal tendency which stimulates the economic development of the country,” Piotr Prokopovich said. The volume of retail deposits has been growing, too, he stressed. Next year they are projected to increase by 35%. “This is quite a big growth,” Piotr Prokopovich said.

The resource base of Belarusian banks is projected to increase by at least 42%, or Br20 trillion. Funds of the population, enterprises and non-resident companies remain the main sources of growth. In fact, each of these sources accounts for one/third of the increase in the resource base of the banks.

Piotr Prokopovich also said that the work will be continued next year to ensure stable and safe performance of the banking system. The goal will be achieved by means of meeting “all standards of safe performance, which have been brought close to international standards.” Any crisis situations in the banking system, separate banks will be revealed and liquidated at the earliest stage.

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