July 24. Ukraine made a scheduled $120 million coupon payment on Eurobonds due 2017, having once again avoided technical default.
Just like every time before, it was a question if Ukraine would pay or not and if there would be a default or not – even though $120 million are a sum you can refuse to pay only out of principle. The Ukrainians are still able to find money for their war. So, those $120 million were hardly the last, were they?
Today, Ukraine’s Finance Minister Natalie Jaresko is very much like the little cowboy from Leo Tolstoy’s well-known fable, who kept crying, “Wolves! Wolves!” when there were no wolves and finally nobody listened to him when the wolves did come. Obviously, pani Jaresko hopes that when the default comes, nobody in Ukraine will notice it, while those abroad will just not care (especially as, according to Jaresko, there is nothing awful in default). In the meantime, the virtual financial world is giving Ukraine’s Cabinet some small mercies: after the abovementioned payment, the Ukrainian bonds began growing in price. The price of the bonds due 2017 rose by 0.03 US cents to $55.35. July 20-24, the prices rose by 1.64 US cents or 3%. But this will hardly give Ukraine anything as the bonds’ discount is as high as 45% - higher than in Ecuador at the times of default (35% in 2008).
So, let’s wait and see if there will be a default this year. In 2015, Ukraine has several scheduled payments: $220.1 million, $176.1 million and $176.1 million to the IMF under a stand-by program on July 30, Sept 25 and Dec 24, respectively; $75 million on Sept 20 and as much on Dec 20 as an interest on two-year Eurobonds worth $3 billion issued in Dec 2013 to Russia’s National Welfare Fund as well as the principal in Dec 2015.
Ukraine may fail to pay on any of the abovementioned dates but each time the creditors are feeling less and less adrenalin and getting more and more used to this possibility.
July 23. Ukraine’s customs offices in Western Ukraine were placed under the control of Crown Agents from the UK.
According to Ukraine’s Prime Minister Arseniy Yatsenyuk, this experiment is part of the anti-corruption campaign launched by the Ukrainian authorities after the shootout in Mukachevo. The project covers Zakarpattia, Lviv, Volyn and Chernivtsi.
According to some foreign experts, low salary is one of the reasons why corruption is so high in Ukraine. For this purpose, for example, Mikheil Saakashvili and his team are getting bonuses from Soros. Naturally, one of the motives why Ukraine’s customs offices have been given to Crown Agents is that the British customs officers will hardly care for Ukrainian wages. But the Ukrainian customs officers would be no less efficient in fighting corruption if they got British wages. Instead, Ukraine’s Cabinet is fostering unemployment by giving jobs to foreigners.
According to Ukraine’s Economic Development and Trade Minister Aivaras Abromavicius, this experiment has been carried out in a number of countries in transition, with the same company involved. Abromavicius meant such countries as South Sudan, Albania, Ethiopia and Cayman Islands.
Loss of sovereignty has already become something normal for Ukraine. Today, many of its ministers are foreigners, its economy is being subsidized by the IMF, its troops are being trained by Americans, its Interior Ministry is being reformed by Georgians, its property is being sold mostly to Americans and Europeans. So, the decision to give customs officers to a British company looks as natural as a gay parade in Berlin.
July 23. Ukraine’s Cabinet admitted the need to review the country’s consumer basket.
It is never late to do something, but today it makes no sense to do it. Mass media say that the key reason was a claim by a Kyiv human rights activist to raise the basket from 1,218 UAH to 7,000 UAH. But the suit was not the reason but just a pretext. The key reason is the wish of some political forces to score more points before the next elections.
The ministries of social policy, health care, finance and economic development are those “many cooks” that will deal with the content of the consumer basket. But even if they pass any decisions, they will remain on paper and will be handed down to the next Cabinet. After all, there was no task to harmonize the basket with consumers’ needs but just to analyze the basket and to determine the cost of living.
Let’s look inside the basket. For able-bodied citizens it is 277 grams of bread, 260 grams of potato, 301 grams of vegetables, 175 grams of fruits, 145 grams of meat, 24 grams of sausage, 36 grams of fish, 10 grams of cheese, 14 grams of butter, 66 grams of sugar, 25 grams of vegetable oil a day. The basket does not include tea, coffee, cocoa, juice, alcohol.
Men’s clothing includes one jumper and a pair of trousers for ten years, a suit, five shirts for four years, a pair of jeans for five years, a sweater and a playsuit for three years, seven pairs of socks for a year (now that the men’s holiday in Ukraine has been cancelled, six pairs).
Women’s clothing include one coat for eight years, one wool dress for three years, one cotton dress for five years, three pairs of tights for one year, one brassier for a year, a swimming suit, a handkerchief, a scarf for four years, a bathrobe, three blouses and one skirt for five years.
Furniture and domestic appliances include a wardrobe for 25 years, a fridge for 15 years, a TV set for 10 years, a washing machine for 14 years, an iron for 9 years.
The basket contains no repairs, no shampoo, no cosmetics, no medicines, no insurance, no mobile phone but envisages one concert and one book a month.
For transportation and communication, a consumer has just 74 UAH, for paying bills 1.2 UAH (living on a a bench in a park and reading a newspaper?).
If you come across a woman dressed and eating according to this basket, you may well give her all of your money – just out of pity. But the Ukrainian authorities insist that their citizens look according to their consumer basket.
July 22. Yatsenyuk instructed to restore two Donbass-based railroad hauls destroyed a year ago with a view to enlarge coal supplies from controlled territories for the needs of Ukrainian thermal power plants.
He meant the Nikitovka-Mayorskaya-Kurdyumovka and Nikitovka-Konstantinovka roads.
Perhaps, sooner or later economics in Ukraine will prevail over political ambitions. Mutually beneficial economic cooperation may help to realize the Minsk agreements.
According to Ukraine’s Energy and Coal Industry Minister Volodymyr Demchyshyn, Ukraine is receiving 15,000-20,000 tons of coal from the Donetsk and Lugansk people’s republics each day, but the supplies might be enlarged.
This would benefit people on both sides and will spare Ukraine the need to buy bad coal from South Africa.
In any case, this is a good symptom for the peace process in Donbass.
Alexander Dudchak, economist, specially for EADaily
