Today, Ukraine’s Cabinet of Ministers and the National Bank (NBU) only spend money and ask for financial assistance from everywhere. In January-February 2019, the Ministry of Finance attracted 34,8 billion UAH (1,25 billion USD), 886 million USD and 33,3 million EUR to the state budget-2019 due to the placement of the government bonds!
And on March 13, the International Monetary Fund experts have ended their visit to Kyiv to assess the progress of the new stand-by program and allocate the next tranche of a loan of 1,3 billion USD. It turns out that the country does not earn, we are artificially kept on loans from the government bonds and IMF loans.
Despite this, Ukraine’s Prime Minister and the NBU head continue to save too expensive loans and excessively high costs. So, on March 14, the National Bank’s board once again did not reduce the discount rate of 18%, which means that under the pretext of fighting inflation, the credit hunger for small and medium-sized businesses will continue.
Consequently, we will not be able to recover losses in the real sector of the economy. At the same time, PM Groysman and NBU head Yakiv Smoliy still do not want to see the obvious thing – due to rising prices for energy resources and monopolies' tariffs (within the framework of IMF requirements), prices would automatically be increased by the size of cost inflation.
And what will the National Bank of Ukraine do in this situation? Most likely, it will continue to devalue the hryvnia to lower inflation. In addition, the NBU is constantly lagging behind in response to how the hryvnia behaves and how quickly inflation rises.
But our inflation expectations are of quite a big danger for the Ukrainian economy. Moreover, the NBU, the work of the Ministry of Finance and the Ministry of Economic Development and Trade cannot improve.
Therefore, effective interaction between them is a guarantee of stability for the USD.
During its last visit to Kyiv, the IMF mission raised the issue of the abolition of the illegal enrichment rule by the Constitutional Court. However, Smoliy did not see this as a threat to receiving the next tranche of the loan.
In turn, the Ministry of Finance is acting autonomously. Not from our official sources, but thanks to the American business newspaper The Wall Street Journal, very interesting details became known. On March 12, 2019, JPMorgan Chase has directly “lent” $ 350 million to our Cabinet by buying an additional issue of 10-year Eurobonds with the redemption of the 2028 year and the coupon rate of 9.75% per annum.
The fact is, Ukrainian officials, who met with bond fund managers in Miami and New York, offered JPMorgan more than $ 350 million in Eurobonds and privately sold them to the bank.
As is now known, this proposal was accepted, but what is behind the facade of this deal? According to the American newspaper The Wall Street Journal, the bank bought Ukrainian bonds at 98.88% of the nominal value and resold them to investors at the market rate of about 100.5%.
Consequently, if JPMorgan sells all these bonds at this price, then the profit from the transaction will be approximately $ 5.7 million, the publication emphasizes.
Well, and how can you not doubt that such financial transactions are not paralleled with the kickbacks?
Unfortunately, neither the National Bank nor the Ministry of Finance is in a hurry to quickly and seriously respond to the market challenges.
In the meantime, the next meeting of the NBU Board on monetary policy will take place only on April 25. The main thing is to fulfill the deadlines by the end of March of this year 2019 in order to rely on the next credit tranche of $ 1,3 billion. This is how we live with a begging bowl: from tranche to tranche, from loan to loan.
Finally, it is important for everyone to understand why the borrowed money of international lenders does not help the growth of the national economy. On the contrary, the "holes" of the state budget only grow.
This column does not necessarily reflect the opinion of the editorial board or 112.International and its owners.