How to find “not so much money:” Ukraine’s economy for a week

Ahead of the Independence Day.

Ukraine did left Moldova behind and took the 166th place in the list of 166 countries that provided full access to their GDP statistic for 1991-2014.

Only five countries out of the 166 suffered GDP decline over the period under review: Ukraine suffered an astonishing 35 percent drop since its “independence” in 1991, Moldova (29 percent),  Georgia (15.4 percent), ), Zimbabwe (-2.3 percent), and  Central African Republic (-0.94 percent).

According to the World Bank, it is the world’s worst indicator for the last 24 years. The only achievement of the incumbent authorities of Ukraine is the “victory” over Moldova – after 2013, our countries have just replaced each other.

Back to 2000-2013, Ukraine “left behind” all the other post-Soviet countries - GDP growth for 14 years totals some 69.8 percent.  It is surprising that Estonia – now an EU member – showed the worst indicator after Ukraine – a 75.7 percent growth.

Over the years of independence, Ukraine’s share in the global industry fell nearly 5-fold. Ukraine accounted for less than 0.08 percent of the world’s GDP, with the employable population accounting for about 0.7percent of the world labor resources.

…Nevertheless, Ukraine’s Ministry for Infrastructures looks to increase the salary of its leadership by over 8-fold. The ministry leadership seeks to receive quite solid average salary - 37,000 hryvnias.   Meantime, the average salary in Kiev in June totaled 6.7 thousand hryvnias. Deputy Minister Vladimir Omelian said: “It’s not so much, but it is a salary for which you have a right to demand a high-quality result and look for good specialists in the market.”

We anticipate statements from other ministries and departments too. After all, everyone needs good specialists for not so much money.

So far, the arrears of wages in Ukraine have reached 2 billion hryvnias. Actually, everyone is waiting for the next elections – there is no other way to cheer up the people without financial expenditures. This is elementary – they can (partially) pay the arrears of wages.

In addition, ahead of the elections, starting September 2015, they are keen to increase the salary of 170,000 public sector employees by 160-440 hryvnias, which, amid the current inflation, is more like a mathematical mistake in salary calculation. Not everyone has the luck to work at the Ministry of Infrastructures.

August 21. Ministry of Economic Development reported a growth of shadow economy to 47%.   

Everything goes underground: grain, oil products, pontoon bridges… Minister of Economic Development and Trade Aivaras Abromavicius addressed such a suddenly emerged problem in a series of tweets. “We have held an inventory of the State Reserve  - it is simply  “Augean stable” we have to clean.  Oil products have run off, there is shortfall of grain, and pontoon bridges have “disappeared” somewhere… Something went wrong: the inventory revealed that nearly 250,000 tons of grain has “disappeared” from the State Reserve.  It exists on paper only.”

Can Vadim Mosiychuk -  he was appointed as chairman of the State Reserve Agency of Ukraine by the Cabinet on July 2 - explain these shortcomings as the plots of the predecessors or maybe something went wrong not so long ago?

It is probably betrayal; the victory comes in the next paragraph.

August 19. Corruption was one of the reasons to start the last Maidan.  

Moreover, the fight against corruption in Ukraine with the new authorities has reached incredible scales, judging by the continuous media reports about it. According to The Corruption Perception Index published by Transparency International global civil society organization, Ukraine has made a serious program over the year after the change of “the criminal authorities” – rising by two points to the 142nd place among 175 countries.

The Ukrainian Pravda newspaper published the response of the State Treasury Service to the request of the Anti-Corruption Center on August 19 2015. It contained a specific figure that allowed assessing the nation-wide fight against corruption – 786.77 hryvnias. This is how much confiscated funds and proceeds from the sale of the confiscated corrupt property were transferred to the special fund of the state budget as of July 1 2015.

It would be interesting to compare the salary fund of the Anti-Corruption Center with the above funds received from these “anti-corruption measures.” It is hard to believe that there is no longer corruption in the country.  According to Transparency International, Ukraine has not overcome the threshold of ‘corruption disgrace’…Ukraine remains in the club of the most corrupt countries.”

August 18. Deputy Minister of Regional Development Eduard Kruglyak said that after public services price hikes, the level of payments for the public services fell by 6-8 percent to 89-90 percent.

“It is connected with both registration of subsidies and that people have less cash. The situation will deteriorate in winter.  The level of payments may fall even lower with the start of the heating season, in Nov-Dec, despite any measures.”

Such situation was quite predictable. The population incomes are not sufficient to cover the prior compulsory payments. With the constantly growing (at the request of the International Monetary Fund, as a condition to a regular tranche) cost of the public services, many will have to choose whether to pay for gas and electricity or to buy the school supplies for their children.  

The total debt for the communal services in the country is as high as 12 billion hryvnias. With the beginning of the heating season, it may increase to 20 billion. In Zakarpatye, for instance, the people do not wait for the winter to stop paying the new increased gas prices. They have already stopped paying for the gas supply, says Vitaly Shatilo, the chair of the Board of Zakarpatgas PJSC.

August 16. Minister of Finance Natalie Jaresko left her motherland and returned to her workplace in Ukraine.  The return from the United States after the negotiations for debt restructuring was without flash, as they did not lead to the desirable result. Obviously, the scenario of “Ukraine and Debt” piece did not imply restructuring of the 40% of the debt. After return, Jaresko continued to negotiate with her foreign colleagues on Skype and by phone, which is less pleasant to do in August than to communicate on the Pacific shore…

However, the United States has enough own problems to think over. Friday, on August 21, the U.S. stock market plunged dramatically. At the moment of closing, at NYSE, Dow Jones Index tumbled 3.13 percent  – the worst index since 2011.

After returning from the United States, Jaresko can take the prime minister’s post. This is possible, of course, if Arseniy Yatsenyuk agrees to head the National Bank. “The best prime minister” in Ukraine’s history may now become the best head of the National Bank of Ukraine.

Alexander Dudchak, economist, specially for EADaily