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IMF experts warn government against excessive pay increases

 

Planned pay increases risk fueling demand and reducing competitiveness, the International Monetary Fund (IMF)’s staff team says in a report prepared following consultations with Belarusian officials, which ended on March 25.

The team notes that nominal pay in the public sector increased by 67 percent in 2012, and that a further 20-percent increase in the First-Class Worker Rate is envisaged for 2013.

“These increases pose a macroeconomic challenge because they set a benchmark for the rest of the economy,” the report says. “To the extent that wage increases exceed productivity growth they contribute to overheating and declining competitiveness. Separately, a civil service reform package will increase

civil servant wages – which lag wages elsewhere in the economy – by 30 percent, while reducing staff numbers by the same number to contain overall wage costs to the budget.”

“Limiting wage increases would help contain demand and restore competitiveness,” the IMF team says, recommending that pay increases in 2013 should be limited to 12 percent, in line with the authorities’ 10-percent inflation target, and that the planned increase in the First-Class Worker Rate should be reconsidered and brought into line with this objective. // BelaPAN