Why state aid to save Ukrainians from corona crisis is negligible?

Author : Anna Peshkova

Source : 112 Ukraine

After the introduction of quarantine measures, the government presented a plan to help businesses, the unemployed, and doctors at the forefront of the fight against Covid-19
23:10, 7 May 2020

Coronavirus face mask financial market

More than 60% of the population of Ukraine live below the poverty line, and the coronavirus epidemic only exacerbated the situation. After the introduction of quarantine measures, the government presented a plan to help businesses, the unemployed, and doctors at the forefront of the fight against Covid-19.

But a month after the announcement, it turned out that there were problems with the launch of assistance. Doctors, for example, have not received their 300% surcharges. The prize of one of the doctors in the Vinnytsia region amounted to 0,037 USD, and some employees of medical institutions even faced a reduction in salaries. Entrepreneurs, however, left hope for cheap loans.

Whose expectations have not come true, and why is the promised "quarantine assistance" blocked?

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 Healthcare workers without surcharges

Ukrainian doctors with a minimal salary were promised to get an additional 420 USD, nurses were to get 370 USD, and junior staff – 300 USD. The head of the Ministry of Health, Maksym Stepanov, said that absolutely all the promised 300% bonuses for the doctors were sent to the regions. But local medical staff says the opposite.

“We just laugh at these sky-high bonuses. We used to receive very low wages, we still get it. I have one and a half salaries because there are not enough doctors. I received about 150-170 USD in March - this is taking into account allowances for seniority and category,” Nina Lozovskaya, Ukrainian nurse, tells.

Some doctors sound the alarm on social media, others go out into the streets with protests. They say they will stop working if they don't get honestly earned money. So what is the reason for the lack of allowances?

The fact is that the execution of the order of the Ministry of Health was transferred to the shoulders of the local budgets, which a month ago caused serious concerns of experts due to the total underfunding of the regions.

Regional councils say that there is money, and the problem here is misunderstandings regarding the number of allowances. Many doctors were waiting for an increase in the entire salary of 300%, but in reality, they only count the money for hours, when the doctors contacted the patients.

But some medical facilities were left completely without funding. Director of the Khmelnytsky Infectious Diseases Hospital Oksana Piddubna says that the hospital did not receive money from the local authorities at all. National Health Service promised to allocate for this hospital 28,000 USD. Therefore, in April, some doctors were charged with an advance only. And the general director of the Dnipropetrovsk regional hospital, Inessa Shevchenko, went on a hunger strike on the background of the lack of subventions.

Yuriy Kamelchuk, MP from the ruling Servant of the People faction, says that the money was most likely stuck at the level of regional state administrations due to legal nuances. He emphasizes that before the coronavirus there were precedents when money came to some towns in the region, while the others did not get them. According to him, in some districts it is necessary to communicate with the Minister of Finance in order not to wait a week or two for the bureaucratic procedures.

Legislative conflicts of the Healthcare Ministry

The Ministry of Economy assures that the draft regulatory action from the Ministry of Health was not received at all. That is, in fact, there are no guidelines for charging 300% of the bonuses for the doctors.

In fact, no changes were made to the order of the Ministry of Health No. 768, so surcharges are provided only for March, but not for April. This is another collision. And even if the Cabinet of Minister's decree of March 23 does come into force, doctors are likely to still receive less than they expected.

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Taking into consideration the answer of the Ministry of Economy, it became clear that in fact, 200% of payments are provided for physicians, taking into account all the bonuses. Earlier, the public was assured that the figure in the decision was eventually corrected. Apparently, this never happened.

Healthcare Minister Stepanov claims that the department monitors all cases of non-payment. But there are not enough reasons to share the optimism of the minister, given the filling of the budget. The revenue side of the budget is reduced in comparison with the previous draft estimate by 4,5 billion USD. So the forecast for doctors is pessimistic.

Experts pin their last hopes on the introduction of insurance medicine. With such a financing system, the money will appear at the expense of insurance contributions from the state, the employer, and the patient himself. According to rough estimates, it would be possible to allocate 11,5 billion USD per year. However, there is no intention to launch such a system in Ukraine.

 Mortgage discounts and salary loans

The quarantine dealt a serious blow not only to the health of physicians who work with patients with coronavirus but also to business. In particular, in the real estate sector. Already after the end of anti-epidemic measures, some objects might not be completed. A mortgage in Ukraine is becoming less and less popular because of high rates. In our country, the use of mortgages is ten times lower than in the European Union.

During quarantine, the authorities went towards the Ukrainians, introducing a repayment holiday. Until the end of the pandemic, citizens might not fulfill their financial obligations, including on mortgages. But this solution is precise and does not save ordinary Ukrainians too much, because after the quarantine is over, they would have to take over all the accumulated payments.

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The President in his video message dated April 27 ordered the National Bank (NBU) to develop and introduce a bill on mortgage borrowers in two days to facilitate loan conditions. Zelensky demanded to reduce the mortgage rate to 10%. In addition, the guarantor also demanded to develop a bill for businesses with a minimum rate for the payment of salaries.

The president suggested that credit conditions could be facilitated by reducing the NBU discount rate to 8%. The lower the discount rate, that is, the interests at which the National Bank provides loans to banks, the more profitable are loans and mortgages for the population and the less profitable deposits. The National Bank's Monetary Policy Committee said that such a decline is quite real.

However, it is likely that such quarantine programs, as well as premiums for doctors, will not work in the end. The National Bank reminds us that there is a program “Affordable loans 5-7-9,” which was expanded to refinance existing debts and cover current expenses.

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Unemployment benefits and food prices

The Cabinet also promised to support those who were fired during the quarantine. Unemployment benefits now begin on the first day of registration with the labor exchange, and not on the eighth. In addition, unemployment status is available even to those who quit on their own. The minimum amount of payments increased to 40 USD per month. But the main innovation is for those who signed vacation applications at their own expense. It was planned that such Ukrainians will be able to apply for new help – payments for partial unemployment.

But in reality, victims of the signing of such vacation pay cannot count for these payments. Only the employer can apply to the employment center in order to get them. Moreover, companies have to prove that working hours were shortened precisely because of the implementation of quarantined activities. In the case of falling volumes, payments are not provided.

Related: Ukraine’s economy to reduce by 5% due to pandemic, global crisis

Entrepreneurs also say that starting a business through an employment center has become much more difficult now.

And in general, employment center programs are not used as actively as intended. On April 5, the center reported that 166,000 people were registered as unemployed. This figure seems impressive, but in terms of the number of people of working age in the country, it is not so significant. Only every 160th able-bodied person in the country was registered for a month and a half of the quarantine.

In fact, quarantine caused a much higher unemployment rate, experts say. Dragon Capital, an investment company, claims that one out of seven people became unemployed in April. About 3.4 million jobs ceased to function. The calculations of the Chamber of Commerce and Industry as of April 22 are much more modest but still frightening: during quarantine, 1,3 million people lost their jobs. So, far from all those who need it receive help.

There is a risk that in the future, and those payments that are at the moment, will be in jeopardy. There may not be enough money for the Social Insurance Fund since it is being replenished at the expense of ERUs. In quarantine, tax revenues have substantially decreased. The state allocated 223 million USD to the fund. But whether such funding is enough is not clear, given that in May-June the number of unemployed will continue to grow.

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The Ministry of Social Policy only increased the burden on the fund by launching payments of living wages for children to individual entrepreneurs of the 1st and 2nd groups who were left without work. Zelensky announced assistance to 300 thousand families, but in the end, the government called a more modest figure - 100 thousand.

On the whole, 40 USD does not save too much the pocket of an unemployed Ukrainian who has asked for help. In the face of declining incomes, the issue of food prices is also relevant. Amid the panic due to quarantine and the prolonged closure of markets, the cost of the number of products increased.

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Economists suggested defining 25-30 goods that would be subject to only minimal taxation. But the government did not go for such measures: only price monitoring was introduced. Supermarkets must report price increases to the State Consumer Service. As a result, monitoring showed an extremely positive situation: in the country, products are getting cheaper. At least, the Ministry of Economy reports about this in an official request for information.

The Ministry of Economy forwarded for consideration of the Cabinet of Ministers a resolution on state regulation of prices for 48 goods of high social significance. Economists doubt that it should be expected against the background of such monitoring results. So it’s unlikely that quarantine assistance is worth waiting for in terms of product pricing.

Unfortunately, the most important program of assistance to the population during quarantine measures is profaned at the highest level. We are witnessing a total “translation of arrows” and references to legislative conflicts. Whether the unsystematic actions of the authorities is malicious or is it banal criminal negligence, is up to the Ukrainians themselves. The main thing is that nobody will bear responsibility for unfulfilled promises again.

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