What does the West want from Ukraine

Author : Olexandr Honcharov

Source : 112 Ukraine

Ukraine should reform its system, as the economic management and statistical accounting are concentrated in one hand
11:45, 16 July 2018

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The agenda of the closing plenary week of Rada before the summer holidays is full of the key world and Ukrainian events. Monday, July 9, 2018, Brussels hosted the 20th and the last before our pre-election campaigns Ukraine-EU summit, where the main topics of the talks were steps to implement the EU-Ukraine Association Agreement and the development of the free trade zone, as well as the implementation of the reform program in our country and the support of our Western partners. At the same time, the West has once again stressed that it does not intend to save or defend any Ukrainian corrupt top official.

Europeans have recommended reforming the system, because Ukrainian economy management and statistical accounting are concentrated in one hand, which makes it easy to hide real and generate the necessary macroeconomic indicators, and top corrupted officials collude with big business to maintain abnormal for the current market situation prices for goods and services. The West has already sorted out these intricacies of corruption ties; therefore it firmly defends the creation of the highest Anti-Corruption Court. What else do they recommend?

Related: Do Ukrainian authorities need another round of hryvnia devaluation?

Our European partners propose, for example, to implement independent price monitoring, including public monitoring. We see how the prices for energy resources and utility tariffs have uncontrollably increased in recent years.

We must think about what kind of power we choose. Well, now I would advise to very carefully follow the dollar rate, because we are on the edge, after which a new round of hryvnia devaluation would come. Moreover, the NBU gave a new impetus to the US dollar rate growth. July 12, we were informed that the board of the National Bank of Ukraine decided to raise the discount rate to 17.5% per annum from July 13, 2018, to return inflation within the target range in 2019.

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Accordingly, the volatility and unpredictability of the hryvnia will only increase. And the large currency speculators perfectly know that the National Bank has neither the means nor the will to fight against them. So, the US dollar will grow. At the same time, one of the main problems for our national currency is the armed conflict in the east of the country. And until this military crisis is resolved, no one will spend the currency on maintaining the hryvnia, as this is a useless waste of gold and foreign exchange reserves. Well, and as the financial market lives in the future, the hryvnia will continue to weaken actively, and this trend will continue in the next year, 2019.

Taking into account the fact that the NBU has already increased the discount rate three times from 14% to 17.5% per annum this year, it is easier and more profitable for our commercial banks not to lend to enterprises that are increasingly unable to repay loans, but to go to the foreign exchange market for the dollar and Euro. In this situation, it is easier to buy dollars and follow the growth of the foreign exchange rate. Also, large banks, currency speculators are very interested in the volatility and unpredictability of the hryvnia.

Related: Hryvnia bears the cost of mistakes of Ukraine's Cabinet and Parliament

However, IMF still does not give the credit, and we desperately need a "cushion" of current liquidity. Plus, we cannot hide the fact that the authorities began printing too much money, so the amount of money in Ukraine in June this year increased by 1% - to 0,0 trillion USD. Therefore, July 11, at the meeting of the Cabinet, we expected from the Prime Minister not only information about saving money in the Prozorro system but also concrete proposals on how to change the situation on the Ukrainian market and “pour” liquidity into it.

If the Cabinet cannot begin the fight against de-offshorization, let it announce full amnesty of the capital. Maybe, the effect would not be immediate but still. Of course, we need to learn the details of this implementation, and most importantly, we should create such a system of motivation to return money to Ukraine.

July 11, leaders of 29 countries gathered in Brussels for a NATO summit. There were hopes that a meeting of the Ukraine-NATO commission would be held at the highest level, but, unfortunately, Hungary blocked this possibility. Therefore a compromise was proposed: a meeting in the trilateral format of NATO-Ukraine-Georgia. The optimism that NATO leaders would not change their attitude toward Ukraine, is just a dream. Yes, we all want to be protected and continue to provide us with free assistance. But the high-level policy is not guided by the human feelings.


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President Donald Trump also pointed out that the US is making contributions of 4% of GDP, while Germany gives only 1% of GDP (which, in his opinion, is unfair and unacceptable) for NATO needs. But if the conversation with the Federal Republic of Germany started, the likelihood that the Americans and the NATO leadership will continue to tolerate the verbiage of our corrupt officials is too small. The situation, when the NATO leaders will at their own expense compensate for the miscalculations and mistakes of unlucky and incompetent top officials from Kyiv, is not real anymore.

Related: Tax on withdrawn capital - new economic miracle in Ukraine?

And yet, returning to the decision of the National Bank to raise the NBU discount rate to 17.5% per annum, one of my colleagues in this connection has noted: since more than 90% of our people depend on hryvnia, more and more of their anxiety depends on the level of inflation, but inflation, unfortunately, will also grow. For example, the Kyiv public transport fare has risen to 8 UAH (0,3 USD). Previously, one-time travel for a bus or tram was 4 UAH (0,15 USD), and 5 UAH (0,19 USD) for underground.

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

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