Discussion of Ukrainian economy: Scenarios for 2015, March 24, Kiev


Nowadays Ukraine faced with the great challenges: civil protests (so called Maydan) which led to the following overthrow of Yanukovych and hybrid war in Donbass. All these triggered crisis and economical collapse in the young state.

To survive as a nation, Ukraine recently received in second attempt $17.5bn four-year loan from IMF. It’s aimed to stave off Ukrainian bankruptcy and stabilize battered economy.

To discuss the implementation of the bailout agreement, future of Ukrainian economical and financial sectors in common was conducted meeting of bankers and economists.

The discussion was organised by Free Economical Lectern with the participation of following debaters: Mykhaylo Kukhar — director of Independent group of macroeconomic analysis and forecast, Slava Rabinovich — CEO of Diamond Age Capital Advisors, Vasyl Gorbal — MP, member of the council at Central Bank of Ukraine, president of Ukrgasbank, and Oleg Malkin — chairman of the board in the PINbank.

Guests and participants met in the Teacher’s House — monumental construction accomodating several hundred people — to discuss the future of Ukraine and its financial system in particular.

Debating started with statistics. Accumulated data suggests that Ukraine now have a roughest passage since 90-s. According to Kukhar, average wage in Ukraine today is approximately 125 dollars. The same level as in Albania.

National and national guaranteed foreign debt, billions dollars

Also not so optimistic news regarding the public image of Gontareva, current head of CBU. Upon the latest sociological research, her rating is 1.9%.Among problems also a matter of trust towards a banking system: people draw money and convert them into foreign currency.

Gross domestic product (billions dollars) and inflation (%)

All this happening against the backdrop of a 30% rise in a price of housing and recent rise in the cost of goods.

But — according to Mykhaylo — it’s not a reason to lose courage because there is few positive trends in economy: balance of payments flattened out and imports, which is consisted mostly of the energy resources, fell. In order to stabilize financial system and overcome the crisis he proposed two alternatives: moratorium on withdrawal of deposits or theirs securitization.

The least optimistic speaker, Slava Rabinovich, claimed that defolt in Ukraine quite likely to happen. The only option to prevent it is a financial stabilization and, ‘import of people, who saw the world. Preferably with higher eductaion’, says Rabinovich.

He adduced an example of corporate law in Delaware and recommended to carry out reforms in the fields of property rights protection, innovations and in SME — small and medium business. It can, he guessed, lead to positive changes wherein every citizen won’t want to be in the sidelines anymore.

In witness of his words Rabinovich quoted Party of democratic choice and their research, indicating that Ukraine and Russia are the worst by level of the tax system.

Another debater, Oleg Malkin, suggested that the government has to resort to increase in salaries and social benefits by monetary expansion.

His associate, Vasyl Gorbal, adds to above that there must be taken following steps in order to stabilize economy: restructuration of the external debt and establishment of trust towards the banking sector.

Malkin supposed that pressure on dollar currency market is avoidable but new utility rates are the main obstacle because of the possible default in payments: in October — as alleged by him — may occur default in payments. End result is a collapse of economy and establishment of hryvnia exchange rate on the level of approximately 30–50 per dollar.

Root of the problem — lack of systematic investments in the country: state either invested in foreign assets, either acquired exports.

In any case Ukraine, besides of war and unpredicted political situation, has one more enemy — corruption. According to Malkin, fourth of Ukrainian economy resides in the shade meanwhile in Europe this rate is 9%. Possible remedy is to minimise cash settlement and turnover of dollar. In other words, stop selling currency for common needs.

‘The population conceals over 90 billion hryvnia, it’s a matter of distrust towards the government’, goes on Oleg. ‘We are all here separatists, although I keep money in a bank. I say: take the money and bring them in banks’.

According to his words, ‘You can sit tight, if you see a light at the end of the tunnel’. Moreover, economic sectors indicate positive trends in export and this can improve balance of payments. But as Rabinovich, he makes mention regarding the importance of decreasing total tax load on the business resulting in a greater consumption.

‘Yes, [now] we’ll be travelling less round the world. Anyway, in Ukraine a lot of unexplored places’ — suggests Malking.

Photos and presentation by Free Economical Lectern.