Ukrainian salary decreased to the level of poor African countries

Author : Oleksandr Okhrymenko

Stop helping currency speculators and create favorable conditions for crediting of the economy - expert
10:02, 6 April 2016

Asking about the size of wages is an impolite characteristic. Nobody wants to admit that his salary is at the level of the poorest African countries. But it is impossible to hide the truth. After the so-called "reforms" when the hryvnia has fallen off 3 times and, thus, set a world record, the average wage in Ukraine was 170 dollars, and after paying taxes it reduced to 150 dollars.

Related: In February, headline inflation in Ukraine decreased by 8 percent, - National Bank

In terms of average wages, Ukraine is now close to countries such as Togo in Africa or in Asia, Laos or Tajikistan. All this happened as a result of the collapse of hryvnia and in many ways is the direct fault of the leadership of the National Bank of Ukraine (NBU), headed by Valeria Gontareva. She has actually destroyed the financial market of Ukraine and completely ruined the currency market and helped the currency speculators to make good money in Ukraine. Now the currency speculators are really very satisfied with it, as they have the ability to extract large profits at the expense of Ukraine's population. But Valeria Gontareva is convincing everyone that she had carried out the reforms, the results of which Ukrainians, unfortunately, feel with their wallets.

Related: Gontareva advised Ukrainians to forget about the dollar exchange rate

NBU Experts feel very offended when wages in Ukraine are converted into US dollars and constantly want to impose the view that the Ukrainians should not even pay attention to the hryvnia exchange rate, and to think about inflation anymore. Moreover, the head of the NBU has got a new toy, "inflation targeting." But if you do not even pay attention to the hryvnia, the Ukrainians have nothing to rejoice. According to official data posted on the website of the NBU, real wages in 2015 fell by more than 21% and, unfortunately, continues to fall this year. “Inflation targeting” is just an economic term, but with no real content it remains merely just a word.

Related: New hryvna banknotes to be made of flax

In Ukraine, there is a clear pattern that after the devaluation of hryvnia comes inflation, and its level over time is compared with the level of devaluation. And there is nothing surprising or unusual. Ukrainian economy is highly dependent on imports. About 60% of GDP is import. As a result, even small devaluation of the hryvnia leads to higher domestic prices, and even more devaluation of the hryvnia, which has turned into a collapse. Whether we like it or not, but in order to grow grain in Ukraine, we need import diesel fuel and fertilizer. To produce metal we need imported gas and coke. In order to make a chair or a table, the wood can be taken in Ukraine, but the varnish and paint are imported. Therefore, only a naive person can say that in Ukraine the prices do not depend on the dollar. And now the National Bank undertook to reassure all that the prices do not grow in Ukraine. But people who go to the shops, have a different opinion.

Related: What happened to 4000 hryvnias in 2015?

Inflation is an important component of any economy. Therefore, no one is saying that there should not be inflation, but the inflation must be controlled, and, most importantly, that this inflation is simultaneously evolved with the growth of production and, more importantly, with the growth of wages. But for the normal growth of wages the businesses should properly credited. After the "reforms" it is impossible. Firstly, many legal entities have lost the money in their bank accounts, which Gontareva closed for the purpose of looting. Second, it triggered the principle of "domino," and legal entities, even those banks that work cannot now pay on loans. National Bank has acknowledged that lending does not work in Ukraine. According to official data of the NBU, the total amount of loans to legal entities for 2015 fell by 18%. And the process continues in this year.

Related: Ministry of Finance forecast for 2017: GDP up by 3%, inflation – 8,1%

Many legal entities complain that the loan has very high interest rates. Indeed, according to the NBU, the average rate on loans was 19.2% in local currency to legal entities by the end of February 2016. In practice, interest rates on loans reach 25-27% per annum. This makes the loans very expensive and increases the risk of default. At the same moment, the NBU continues to keep its interest rates at 22%, although the stubbornly says that inflation in Ukraine is 12% in 2016. Here it is difficult to figure out who is cheating.

Two simple steps are needed to increase the revenues of the Ukrainians: stop helping currency speculators shake the hryvnia exchange rate and make it fixed or at least relatively stable as it was before the arrival of Valeria Gontareva in the NBU. Second, to restore lending to the economy, but at normal rates. The legal entities should be able to repay the loans without problems. To do this, the NBU must change the attitude to the banks and to the customers of banks. It should help banks to lend to customers, and not to destroy the banks on subjective factors. Everything is possible, if you make it right.

Related: Ukraine has the highest inflation growth rate in the world - CIA

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