Why introducing economic passport is a bad idea for Ukrainians?

Author : Anna Peshkova

Source : 112 Ukraine

Speaking in the Verkhovna Rada with his annual message, President Zelensky returned to his campaign promise to introduce the so-called Ukrainian economic passport
09:00, 2 December 2021

Speaking in the Verkhovna Rada with his annual message, President Zelensky returned to his campaign promise to introduce the so-called Ukrainian economic passport. For young citizens, they plan to open savings accounts, which will become available upon reaching the age of majority. The President mentioned that the funds that will be accumulated in these accounts, after the age of majority, can be used to obtain higher education diplomas or to buy their own home.

"We will direct these funds to our children. Therefore, by December 10, for the first time in history, I will introduce a bill on the economic passport of a Ukrainian. According to it, these funds - payment for the use of our subsoil - will be accumulated on the personal accounts of children of Ukrainian citizens," Zelensky said.

Related: Zelensky's annual address to the people: Key points

According to the Constitution, land, mineral resources, water, and other natural resources within the territory of Ukraine are the property of the Ukrainian people. So, theoretically, Ukrainians really have the right to a share of finances from their implementation. But in practice, for the majority of citizens, the initiative can play a "minus".

Counting money

In fact, apart from confirming the relevance of this topic in the current realities, the President did not voice anything new. The fact that money from the accounts of Ukrainians could be used for education was known before. The bill № 2801, registered a year ago, assumed that the money could be spent on any needs of the child. And for the sake of such goals as education, they could be removed ahead of schedule. As in cases when funds will be needed for the treatment of a child, if the parents do not have the finances for this, for housing, if a natural disaster occurs.

The main intrigue for today is around the amount that they plan to pay to little Ukrainians. Of course, Ukraine is not Kuwait, whose citizens are paid from 50 to 200 thousand dollars. If the source were only rent, then, according to our calculations, Ukrainians could receive 40 thousand hryvnias by the age of majority. And this is without taking inflation into account.

Bill No. 2801 assumed that the Ukrainians would immediately be allocated 1800 USD. Taking into account the current rates on deposits, by the age of the child, the amount could grow to about 7,000 USD.

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This amount could really be enough for four years of study at the university. True, not in everyone. For example, it will not cover education at the Shevchenko National University of Kyiv: a full bachelor's degree now costs about 9,000 USD. Needless to say, buying a home, which an adult citizen will not be able to take even on a mortgage at 5% under the "Affordable Housing" program. Especially - with the current stringent requirements for participation in it.

In addition, if the rates on deposits are reduced (namely, by a decrease in rates on loans and, accordingly, on deposits, Zelensky boasts), the funds may end up being less. If accumulation in hryvnia is supposed, inflation can simply "eat up" a significant part of the money. The hryvnia has already depreciated 3.5 times. If the economy showed its cyclical nature and all the events of the last 18 years were repeated, then, according to our calculations, this deposit amount by 2039 would be equal to today's UAH 95 thousand. Moreover, since this is an irrevocable financial aid, it may also be subject to 18% of taxes.

The main question remains: where to get the money?

The UAE, where the "economic passport" works, is one of the world leaders in terms of oil production. Ukraine is also among the main mineral and raw material states of the world, but there is not enough oil and gas, which states with an "economic passport" are proud of. The main reserves were depleted during the Soviet Union. We extract sand, crushed stone, amber, nickel, minerals from which ferroalloys are produced.

"There is a lot of money in the United Arab Emirates, there are a large number of migrants and a small number of" theirs." We have no oil, no migrants," economic expert Alexander Okhrimenko says ...

One of the initiatives was to create a "Fund for the Future", replenished by rent. Now Zelensky is talking about rent again. According to him, after the entry into force of Law 5600, oligarchs will pay for the future of children. However, a careful analysis of the initiative shows that the source will be mainly farmers, who will be under increased tax pressure. Farmers will be forced to increase the cost of their products to buyers. So we will pay for Zelensky's beautiful project out of our own pockets. In addition, you will have to pay more for alcohol and communication.

This is not to say that rent is free money. Funds from this income line usually go to pensions, low-income benefits, scholarships and other benefits. Annually, budget revenues from rent are reduced, as the production of both gas and coal in Ukraine is falling. It is unclear whether the country will have funds in 10 years to fulfill its obligations to newborns with this option.

The funds, of course, can be simply printed, but in this case, the whole idea of ​​an "economic passport" is leveled. In addition, we will pay out of our own pocket with inflation.

Related: Zelensky assures electricity supply restrictions, tariff growth not applicable to Ukraine

Risks in Ukrainian realities

But what is much more important - it is not known who will be responsible for the safety of the funds of the Ukrainians. If they are invested in a state bank, which goes bankrupt, the funds will be compensated by the state, that is, again - by the citizens themselves. If, however, a "Future Fund" is created, will the fund's management be held liable for the misuse of funds if something happens?

Recall that even with ongoing assistance at birth, abuse is observed. An official of one of the regional departments of social protection, for example, issued benefits for 190 non-existent children.

In Norway, funds are accumulated in special funds and invested abroad, so as not to spur inflation in the country. The purpose of the fund is to ensure the well-being of the country after the oil reserves run out. That is, first, the money is multiplied, directed to restructuring the economy, and then it is divided. Roughly speaking, you can distribute fish to people, or you can sell it, buy fishing rods and then distribute much more fish.

Whatever the positive idea of ​​the "economic passport", unfortunately, this does not make it more realistic. If you want to make education more accessible, you don't need to reinvent the wheel. It is enough to expand the state order to universities. But the main thing is that before we can eat up money, we need to learn how to make it.

Related: Zelensky ready for direct conversation with Putin


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