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Four years ago, the main topic of conversation was the hryvnia exchange rate. In May 2014, the hryvnia "has got into a wax". It was difficult to understand when all this would end, devaluation grew every day, and although the IMF gave a loan, the depreciation of the hryvnia continued. The population massively withdrew deposits from the banks, but banks could not give back all the money, and the panic grew. The business was concerned with how to "cash out money and funnel it into the offshores." And now the foreign exchange market is more or less stable, even boring, almost like in 2013, but...
Ukraine’s balance of payments for the first quarter of 2018 was reduced to a deficit of $ 272 million. In the first quarter of 2013, the surplus of Ukraine's balance of payments exceeded $ 1.8 billion. The surplus is always better than the deficit. But what is hidden behind this surplus?
The current account balance for the 1st quarter of 2018 was minus $ 603 million. For the first quarter of 2013, the current account balance was minus 3.2 billion dollars. This is a success. But due to what it happens? The export of goods and services from Ukraine for the first quarter of 2018 amounted to about $ 13 billion, which is 27% less than in the same period in 2013. Imports fell by 30%. It was possible to reduce the negative balance of Ukraine's foreign trade due to the falling of the imports, not at the expense of export growth. The economy shrank. We started to export less, and demand for imports decreased. In addition, the incomes of the population have fallen, and now we buy imported cars and household appliances less. So this is more likely a half-victory. Promised growth in exports due to the devaluation of the hryvnia is not observed.
The export of labor or, in other words, the balance of private currency transfers for the 1st quarter of 2018 amounted to $ 3.4 billion, which is 50% less than in the same period of 2013. Indeed, now the influx of currency from migrant workers is helpful. Because even despite the drop in imports, the negative balance of Ukraine's foreign trade for the 1st quarter of 2018 amounted to $ 1.7 billion and continues to grow. And the payments of the Ukrainian government and business to non-residents in the form of interest and dividends on foreign investments are also growing. In the first quarter of 2018, the government and business paid $ 2.4 billion of interest and dividends. With such payments, migrant workers' money only partially saves our balance of payments. But without them, Ukraine's current account deficit would exceed $ 4-5 billion.
For more than four years, Ukraine has been constantly talking about reforms, and that the investment business has been improving and the ease of doing business in Ukraine has been growing very quickly. But to check these words it would be worthwhile to look at the results of foreign investment inflow to the country. Let us check the words of our politicians and experts from the authorities in practice. For the 1st quarter of 2018, the balance of foreign direct investment inflow was about $ 300 million, which is 3.7 times less than in the 1st quarter of 2013, while the balance of foreign portfolio investment inflow was $ 525 million, or 5.5 times less than in the 1st quarter of 2013. So, talking about fighting corruption and the investment appeal of Ukraine is simply a myth voiced by the power. In fact, there are few people willing to invest money in this mess and chaos, created by our government. Moreover, the election of the president and the Verkhovna Rada are very close, and it is dangerous to do something without knowing of its results. Our government cannot understand in any way that chaos is not a reform. Reforms mean that everything is stable. For investors, all these words about fighting corruption and ease of doing business are empty, they like profit and clear rules of the game on the market, and our government cannot offer this. Only slogans and declarations about the reforms.
For the 1st quarter of 2013, Ukraine has repaid old IMF loans for $ 1.3 billion. Again, Ukraine entered the repayment stage of old IMF loans, which they collected after the Maidan. For the 1st quarter of 2018, Ukraine repaid $ 540 million under the old IMF loans. Everything came back to normal. In May 2014, Ukraine borrowed the IMF loan and dreamed of an economic miracle, and now it repays these very IMF loans and says that everything will be fine. It is hardly believable. Moreover, the real figures of Ukraine's balance of payments for 2018 show that during all these famous "years of reforms" there were no real reforms. Ukraine's economy began to work worse, and the attitude to Ukraine from foreign investors became worse too. Now we are waiting for the next promises of our politicians. And this does not mean that these reforms would be real.