Ukrainian financial authorities bringing country closer to abyss

Author : Olexandr Honcharov

We showed to the whole world what the debt hole and incompetent financial authorities are doing with our country. And after the events of last week in Verkhovna Rada, our Western partners also began to fear seeing the development of Ukraine in an even more dramatic scenario

21:06, 9 October 2017

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112 Agency

The Ministry of Finance consistently increases Ukraine's public debt, which in August this year rose to UAH 1,958.37 billion (equivalent to $ 76.56 billion, while last year's GDP barely exceeded $ 93 billion). Also, the devaluation of hryvnia became a special sign of the last few weeks, continuing to accelerate the growth of consumer prices. At the same time, the Cabinet quickly turns the country into a raw material appendage, and with enviable obstinacy we are trying to integrate into the system of European Union, which unites countries only with quality economies. But at home, as in the first year of independence, we only talk about economic reforms and live as inside of construction project.

In this regard, I would like to recall that we have long joined the WTO, uniting more than 150 countries, accounting for more than 95% of world trade. But who benefits from this? Is it Ukraine? No, in such a way only those countries those have competitive political and economic systems benefit from WTO membership. So, as is known, on October 1 of this year, the autonomous trade preferences of the EU for Ukraine came into effect. So what? In the Cabinet, of course, on this occasion, laudatory speeches were again sounded for the uneducated public.

In fact, we were provided with additional zero tariff quotas only for Ukrainian honey (2,500 tons), corn and corn flour (650,000 tons), barley and barley flour (350,000 tons), wheat and wheat flour ( 65 thousand tons), as well as barley cereals (7.8 thousand tons), oats (4 thousand tons), processed tomatoes (3 thousand tons) and grape juice (500 tons). This is something without which Europe itself cannot live. But where are zero quotas for engineering products, metal products and so on? And it is already difficult to hide the fact that for Western investors the Ukrainian market is increasingly becoming second-rate and uninteresting.

These circumstances aggravated also by the fact that some high-ranking officials seem to see everyone mindless idiots, stealing with primitive schemes the well-being of not only our children, but also grandchildren. Judge for yourself - on August 9 of this year the Cabinet canceled the decision on the re-profiling of the bonds of the internal state loan in the National Bank's portfolio, and on October 4, at the meeting of the Cabinet of Ministers, a message was announced that the government of Volodymyr Groysman suddenly approved the operation for the re-profiling of government bonds in the NBU portfolio.

Let me remind you that at the moment, these bonds are worth UAH 361 billion! The Cabinet approved the issue of long-term and long-term inflation bonds for the amount of UAH 219.563 billion! The bonds will be issued in 40 separate issues, they will be repaid from 2025 to 2047. The coupon rate on bonds with redemption from 2025 to 2035 will be from 8.12% to 11.3% per annum, the coupon period is 6 months. From these huge and unbiased figures, it seems that the financial authorities are working as if tomorrow will not come. And also, even the last doubts about the readiness of individual politicians to leave Ukraine soon vanished like fog on a sunny morning, when on October 4 at a Cabinet meeting the members of the government suddenly approved the previously "banned" bill "On Amendments to the Tax Code on the tax on the withdrawn capital".

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The main innovation of this draft law of Ukraine is the replacement of the profit tax by the tax on the withdrawn capital, which provides the taxation of distributed dividends or equivalent payments, as well as the waiver of the tax on repatriation. At the same time, the tax rate on the withdrawn capital should be 15% when paying dividends to a non-resident legal entity or natural person. For payments equal to dividends, the rate will be 20% (interest payments, insurance contracts, etc.).

"We want clear calculations for not to disrupt macroeconomic stability," Volodymyr Groysman said slyly at the meeting of the Cabinet of Ministers, also stressing that possible losses of the state budget can be estimated at up to 40 billion UAH (I will add from myself if there is a mass exodus, you can add one more zero to this huge figure). And in Ukraine, respectively, will remain persons, which will send "bleached" money to their masters in various foreign jurisdictions. And in this regard, I often think that, probably, the time has come to change our institutions, and not just executors.

But to do this, you need to have a huge political will. After all, institutions are the whole system of rules, if you change them, it means breaking the balances and agreements that have developed over the years, infringing upon someone's interests. True, we do not have a direct path to the ultimate goal. In Ukraine, such a way invariably passes through the Maidans. How many more of such rallies will be in the future? However, in the current socio-economic situation, everything is much more complicated. As in the well-known statement of the classic, you need to find the key link and pull out the entire chain. At in Ukraine we lack in general many links of our economic system.

So, we do not have, first, a modern domestic market for joint investment, which would link the real sector of the economy with direct investments; secondly, we lack the state industrial policy development of leading industries; thirdly, legislative support for the long-term development strategy of the organized exchange market and the derivatives market; fourth, the mechanisms of personal responsibility for managing budget money. And, finally, wherever you look, everywhere you see the risks of social unrest.

To say frankly, we showed to the whole world what the debt hole and incompetent financial authorities are doing with our country. And after the events of last week in Verkhovna Rada, our Western partners also began to fear seeing the development of Ukraine in an even more dramatic scenario. So what should we do? Should we devaluate hryvnia, spurring exports, or strengthen our currency, fighting high inflation? And without a cash injection and an increase of the tax burden, it is unlikely that we will be able to solve our debt problems and pay new pensions. Plus, experts are constantly reminding of the approaching economic problems.

Some people, coming back from the regions to Kyiv, say that we should finally give up the illusion that we will be able to return to the pre-crisis social and economic situation. Well, business needs to adapt to low rates and even falls of macroeconomic indicators. After all, the Cabinet will continue to lower real wages, and also shift the cost of taxes into prices. These are our bitter realities, and so far we unfortunately do not have other more professional managers.

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