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Ukraine's cry for economic justice

Author : Olexandr Honcharov

100 richest Ukrainians have concentrated 37.5 billion USD in their hands, that is half of the entire national debt of the country
09:15, 18 December 2018

voxeu.org

In recent years, each time the state budget was a source of hryvnia weakening. It is expected that the year 2019 would not be an exception. Ukraine’s Cabinet and the Verkhovna Rada would have to deal with same, as in previous years, task: either to reduce costs or increase revenues.

Head of the National Bank (NBU), Yakiv Smoliy, stated that in 2019-2020, Ukraine would have to pay up to $ 12 billion in foreign public debt. "We do not have access to other financing channels without the International Monetary Fund program, that is, the money of the European Union, the World Bank. Therefore, the proposal to sign a new program with the IMF was economically justified," he stressed. Traditionally, the new state budget-2019 might be balanced only by further hryvnia weakening. Therefore, next year, most likely, the NBU and the Cabinet of Ministers would support the hryvnia budget aspect and the social one.

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The financial authorities would harshly control the budget aspect since the deficit of the state budget adopted by the Verkhovna Rada is at the level of 3,21 billion USD. Well, IMF analysts lowered the estimate of Ukraine’s GDP growth in 2019 to 2.7% (from 3.3%). It would be the most complicated problem to be solved by the Cabinet of Ministers, Verkhovna Rada, and NBU in terms of devaluation and high inflation. One thing is absolutely clear here: the governing elite decided not to worry too much about this issue. This is eloquently attested by the fact that for 10 months of the outgoing year, imports of goods to Ukraine exceeded exports by 7.95 billion USD. Therefore, the hryvnia resembles a self-retaining spiral, and it is extremely difficult to stop it at this stage.

In turn, our authorities decided not to mess with the social aspect, they are not interested in it. This is especially indicative on the background of the fact that the wealth of the 100 richest Ukrainians grew 12 times faster than the GDP of Ukraine - they have concentrated 37.5 billion USD in their hands (half of the entire national debt of the country). The oligarchs also increased the rate at which their total wealth grows: from last year’s 33% to the current 43%. And as a mockery, they have already approved the 2019 state budget which provides 66 USD living wage, and the minimum wage is 149 USD. People work, but receive nothing for a decent life. Yes, there are successful ones, but far more Ukrainians remain below the poverty line.

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In fact, Ukraine’s self-exclusion from performing socially significant functions is more than evident. Let me remind you that the prices for the last four years have increased 2.5 times, and pensions only by 70%. Healthcare expenditures of ordinary Ukrainians continue to grow, and the poor clusters (such as pensioners and the disabled) are not sufficiently subsidized. How will this topical issue be solved in conditions of devaluation and inflation?

And how long will the offshore capital supporters remain in power? But the worst thing is that the key question is still open: when our society learns to choose the top officials, who would be real political managers, but not athletes or artists. Is this why we remain the poorest country on our continent. And offshore capital owners consider us just another business project.

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Who will ensure the safety and survival of those remaining in Ukraine? When will we elaborate our own national economic model with a stable national currency? I think the offshore business deliberately does not lead us out of this long cycle of cheap hryvnia.

First of all, the Cabinet of MP Groysman does nothing to attract investment in the national currency. It is clear that the National Bank is also not an independent body. And everything is obvious here.

NBU head Yakiv Smoliy seems to turn a blind eye to the situation with the Ukrainian economy.

What should citizens do in these circumstances? Would the new team of the state managers come in 2019? What will the new team bring for Ukraine?

In order to provide sustainable economic growth and raising incomes of citizens, Ukraine needs to attract investments, and the investors do not consider out political leaders competent and purposeful enough.

By receiving technical assistance from the United States Agency for International Development (USAID) and the EBRD, our political leaders can’t elaborate regular rules of the game in Ukrainian capital markets; that is a special legislative framework, adopted by the draft law "On the capital markets."

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Today, this is a fatal failure in the economic development of the country and in the fight against poverty. And this will always lead us to large-scale crises, to the devaluation of hryvnia and inflation. Many countries have gone through this. We must remember the lessons of the economy! The recent history of the Soviet state, in particular, the short period of military communism of 1918-1921, is still memorable and seems close to some of our politicians.

The characteristic features of that policy were extreme centralization of economic management, curtailment of commodity-money relations, and the idea of a planned economy was turning the country into a single factory, the head office of which directly controls all the economic processes. Then NEP (new economic policy) has replaced military communism. But first, the Bolsheviks have demolished all the private banks and confiscated the deposits. Similar happened today, 96 out of 187 banks were scuttled. And this form of economic development inevitably leads to the total impoverishment.

Related: Main reason for economical weakness of Ukraine

Read the original text at 112.ua.

This column does not necessarily reflect the opinion of the editorial board or 112.International and its owners.

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