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Belarus plots reforms to expensive meat subsidies

Post a commentBy Eugene Vorotnikov , 17-Aug-2017
Last updated on 17-Aug-2017 at 17:51 GMT2017-08-17T17:51:15Z

State support for Belarusian meat industry amounts to 1.6% of the country's GDP
State support for Belarusian meat industry amounts to 1.6% of the country's GDP

Belarus plans to reform its profligate state support scheme, backing its domestic meat industry, with the aim of making it more efficient and profitable, according to a spokesperson for the country’s President Alexander Lukashenko. 

He said the government plans to better focus public investment and operational support on the meat production and processing sector, which has shown poor returns on the major cash injections made in recent years.
Indeed, according to data from the Belarus finance ministry, in 2016 state support provided to the country’s meat production and processing industries amounted to 8.9% of all expenditures of the country’s entire budget and 1.6% of the Belarus national GDP.

A report from the Belarus Ministry of Agriculture and Food said that, despite such financing, last year (2016), the country’s meat sector posted overall losses of 2.5%. Moreover, the proportion of meat producers and processors in the country doubled to 65.6% in the first half of this year (2017) compared to the same period in 2015. Poultry is Belarus’ dominant meat segment – accounting for 60% of output, with pigmeat and beef accounting for 15% each.

‘Astronomic sum’

President Lukashenko’s spokesperson commented: “During the period of 1995-2015, the volume of state support for the Belarus meat sector amounted to US$60 billion, which is an astronomic sum for Belarus. The majority of local meat enterprises received huge volumes of state support, provided in the form of direct budget subsidies and preferential bank loans. However, it is planned that this scheme will be changed by the end of the current year.
Exactly how the system will be changed, the government has not said, but analysts at Russia’s Ministry of Agriculture said one reason for the lack of profitability was the fact that Belarus, which has retained a traditional Soviet-style command economy, still sanctions massive state purchases of meat products, centralising control of the whole industry. Indeed, planned production volumes for the industry’s meat producers have to be confirmed by regional authorities (called voblasts) and sometimes specialist central government services. This means that the majority of meat production in the country is purchased by the state at prices that it sets itself, with the same controls applying to meat processors and exporters. As a result, the majority of profits from exports (where made) are accumulated by the state, instead of producers and processors.

To prevent massive potentially illicit exports of meat products reducing the availability of domestically-produced meat in Belarus – in particular to Russia, other former USSR countries and eastern European states – the Belarus government maintains high controlled meat retail prices, which can depress demand.

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