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The world is changing rapidly. Being at the turn of the IV industrial or technological revolution, we are tremendously slow, and the Cabinet has not yet voiced even the ideology of the new economic model of Ukraine. And where among the priorities of the Ukrainian government is the state support of investments in human capital and stimulation of the internal market of collective investment to maintain growth points in the real sector of the economy? But this is a direct duty of the Cabinet to prepare a long-term development strategy for 15 years ahead. So, to what economic future do the Cabinet and the Verkhovna Rada prepare us today?
And especially acute question for these days is - where our financial authorities could receive money, for example, to pay off state bonds? Of course, it would be best for the ministers and the leadership of the Verkhovna Rada not to bother with launching a new economic model and expanding the taxable base, but to transfer these debts to the following government and taxpayers. For this, by the way, the Ministry of Finance has already managed to prepare and submit to the meeting of the Cabinet of Ministers a draft resolution on the re-profiling (restructuring of payments for servicing and redemption of government bonds, which are in the National Bank's portfolio): "In 2017-2020, the Ministry of Finance should ensure repayment of over 50% of bonds, which are owned by the NBU, including UAH 46.4 billion in 2017, UAH 58.5 billion in 2018, UAH 78 billion in 2019, and 47.9 billion UAH in 2020".
Thanks to the fact that the re-profiling will not affect all government bonds in the portfolio of National Bank of Ukraine, but only securities worth 221.6 billion hryvnia. Yes, the situation becomes sadder and sadder. Unless financial and economic block of the Cabinet will start to understand that their actions fundamentally undermine the credibility of the hryvnia . In addition, because of them, this magical mechanism of launching local financial crises is active - a free capitals account, a hryvnia volatility and a high yield of financial assets. This cause a speculative investment in the Ukrainian market.
May 2017 showed itself very difficult for the trading floors of our currency market. There have been sharp ups and downs in exchange rates. Now the hryvnia rate is frozen and waits for the further development of events in the summer. First of all, our currency expects a revival of the news background, which again can provoke more and more powerful waves of ups and downs. In a word, the roller coaster in the Ukrainian financial sector will continue, and currency speculators are still pretty tough playing out the correction of the hryvnia’s rate.
Some experts have already managed to name such exchange rate fluctuations as death convulsions. However, other analysts, considering that the head of the NBU Hontareva (who earlier submitted a petition for resignation to President Poroshenko from May 10) actually went only on a long-term vacation - do not share this opinion. They think these "swings" are just a nervous tic. Well, let's see, whose short-term forecasts will come true. But one thing is clear, the ‘party’ will soon begin, because the authorities are not ready to face the US dollar rate. In support of this, let’s look at several more specific figures. So, domestic demand is supported by consumption, and where does it go? Out of 100 hryvnia increase, 53% -57% covered by inflation, 22% - 25% - by import, and only 1 hryvnia out of 50 - stimulates domestic production.
What do these figures show? The fact that if we stimulate consumption, we will stimulate inflation by 50-60%, the rest will stimulate import, and only 20% - domestic production. I do not want to say that it's bad, but it's more important to emphasize that stimulating consumption will lead to higher inflation and higher imports. The nearest perspective may bring the devaluation of hryvnia , the price increase, and further, if the hryvnia weakens to US dollar by 1%, then consumer prices will grow by 0.2-0.3%, a decrease in the national currency can add 6-9% to inflation. Is this the reason why the International Monetary Fund doesn’t give us money, but only hope for the next tranche?
Maybe we can name the expected IMF tranche of $ 1 billion, which we received in early April, in fact, the pre-default loan. Of course, there is still a potential for devaluation of the hryvnia, otherwise we’ll have default. By the way, I wonder who would Petro Poroshenko appoint responsible for the default? And, unfortunately, the credibility of the banking system is so undermined that earlier than in 5-7 years it is unlikely to see it restored. According to experts' estimations, by the end of 2017 the National Bank will recognize at least 30 more banks insolvent. Another impressive figure.
Therefore, people actively continue to search for where and how to keep their savings. If we assume that some high-yielding citizens will place at least half of their available currency in securities of joint investment institutions and public companies of the real sector of the economy, the total amount of attracted funds in Ukraine may be about 1 trillion hryvnia.
That's why it's time to launch alternative banking projects on the collective investment market. Moreover, the relevance of such projects is growing, because people tend to continue to withdraw their bank deposits in UAH and buy US dollars. And after ATO it will be impossible to restore not only Donbas, but the whole country without domestic and foreign investments. They are desperately needed by chemical industry and metallurgy, agribusiness and energy, many factories and mills.
Another and very important question is - what kind of investment do we need? Of course, from 20 to 30 billion US dollars of direct investment for various sectors of the Ukrainian economy are needed to create new high-tech production capacities. However, the balance accumulated over previous years (the difference between import and export of investments) is negligible. It suggests that, in addition to money, we still need the high-quality managers, modern technologies and excellent equipment, as well as the foundations of European production culture. And, certainly, it is necessary to be able to pack a business, i.e. to issue shares of public companies and investment funds to Ukrainian stock exchanges for attraction of investments, corporate bonds.
It's time to leave the Stone Age and become civilized, as foreign investors and representatives of international donors say to us. After all, in accordance with the assessments of experts and analysts, we have people ready (not capable, but only expressing readiness) to engage in private business - no more than 10%. And what do the other 90% want? I will not surprise you, they want only a stable work with a minimum income, that's all. And, of course, they want peace in Ukraine. And in this connection I recognize a good phrase - if you have big spending in your country, then you should not save on people, but make more money to the budget, or applying this statement to us - the growth of Ukrainian economy should be greater than the growth of budget expenditures.
It would seem that it is easy, to build a modern economic model and an effective monetary policy that would reproduce themselves - under such very modest requests. However, the Cabinet of Ministers and the Verkhovna Rada cannot fulfill this simple task either. In this regard, I give my short-term forecast: we will not have time to recover, and soon we could find ourselves in economic slavery. Well, the idea of economic slavery is not new, modern capitalism is built on it. And we have no time to think long and hard.