Ukraine’s authorities are on the verge, sandwiched between IMF and their own population

Ukraine has found itself in a dire strait, where “the rich get richer and the poor get poorer,” as the old proverb says.

Utility rates for IMF, not for people

National Energy and Utilities Regulatory Commission (NEURC) announced another hike of the electricity price on March 1 2016. The population will have to pay by 25% more per kWh electric power - up to 57 kopecks versus previous 45.60 kopecks. It was not a surprise, however, as Prime Minister Arseniy Yatsenyuk announced this a few minutes before the known incident with MP Oleg Barna. As usually, no one paid any attention to that announcement then. It might seem that the ‘shows’ in the Supreme Rada are free, but, in fact, nothing comes without cost.

Consequently, the owners of apartments under 30 square meters consuming up to 250kWh electric power in average paid about 164 hryvnias before March 1 2016. Now they will have to pay 205.5 hryvnias. It's only the beginning. Starting September 1, when a new wave of price hikes will start, the given category of consumers will have to pay 265 hryvnias. The electricity price for the apartments under 60 square meters consuming up to 500kWh electric power will be 361-453-588 hryvnias, respectively. Meantime, the average salary in Ukraine was 5,250 hryvnias as of December 2015 (in rural areas where most owners of private houses live, the average salary is 3,385 hryvnias). The highest average salary is in Kiev – 8,486 hryvnias, while the lowest one is in Chernovitsky region - 3,924 hryvnias. The arrears of wages have increased by more than 40% - to 1.881 billion hryvnias (ukrstat.gov.ua). In addition to it, gas, water, heat and other prices have been increasing too. Dmitry Vovk, the head of the NEURC, said the gas and heat prices for the population would be increased by 53% in Ukraine starting April 2016 totaling up to 5.5 thousand hryvnias with VAT per 1,000 cubic meter of gas.

Actually, life in Ukraine is getting more and more expensive for households to exist. The price for the Maidan consequences is growing along with the requirements of the International Monetary Fund under the second memorandum of cooperation the sides signed in March 2015.

According to the memorandum, “despite the continuous increases in gas and heating prices, these rates remain among the lowest in the region. The program aims to reach 75 percent of cost recovery gas and heating prices based on international prices by April 2016 and 100 percent by April 2017.”

Undoubtedly, these increases are necessary for the IMF and, perhaps, the Ukraine authorities that hope to get one more tranche to maintain what has been left from economy. The question is about whether the population of Ukraine needs this. International financial organizations funding Ukraine are sure that the utility price hikes in Ukraine will result in a significant increase in salaries in future. Many high-level representatives of international financial organizations quite seriously say that employers will increase salaries in Ukraine on their own as soon as the utility prices reach the level of the ones in Europe. Any arguments of experts against this are set aside.

Social differentiation

Nearly 60% of Ukraine’s population may fall below the poverty line in 2016. In Europe, 5 euros per day is a poverty line, while 2 euros per day is below the poverty line (the current EUR rate is 30 UAH). As the average pension in Ukraine is 1670 hryvnias, 60 hryvnias (2 EUR) per day appears to be an unattainable luxury. International financial organizations do not stay aside and suggest increasing the pension age. In particular, Qimiao Fan, the World Bank Country Director for Ukraine, Belarus and Moldova, believes that to overcome crisis in the pension field, Ukraine needs to increase the pension age gradually.

Meantime, salaries and pensions in Ukraine grow on a selective basis. For instance, in January 2016, the salary of Petro Poroshenko was increased from 9,296 UAH to 11,620 UAH, though it is obvious that the president does not exist on salary. It is noteworthy that the level of his capitals in the list of the top 100 richest Ukrainians increased by 20%: Petro Poroshenko rose from the 9th to the 6th place with 979 million dollars wealth (perhaps, he is saving money from his salary).

Prime Minister Yatsenyuk breathes down his neck. His salary is 8.3 thousand UAH, in addition to 160 UAH for the rank, 2,115 UAH for the length of service, 10,575 UAH for special job category, 1,245 UAF for the scientific degree, 1,660 UAH for work with secret documents, and a monthly reward (in the amount of 20% of salary) - 1660 UAH. Yet it is quite strange that the head of the government that received no-confidence vote in the parliament receives a monthly reward to his salary. Leonid Kravchuk, the first political pensioner in Ukraine, is not satisfied with its 14,000 UAH pension either. He is sure that Ukraine should be ashamed for paying so low pension to him. As for MP Yulia Tymoshenko, judging from her tax statement, she had lived on her salary throughout last year. The country is getting through hard times, after all…

“The day to come, what is it bearing?” (© A.S. Pushkin)

Unlike Lensky (a hero of Pushkin’s novel Eugene Onegin) whose chances for the day to come were 50/50, Ukraine’s chances to overcome the current hardships are fading away with every day.

While some think that increasing the utility prices up to the European ones will pave the way to better future, the ordinary people say their living standards and the economic situation in the country are just getting worse. According to the survey conducted by “Rating” Sociological Group with the support of the Canada government, more than 76% of Ukrainians said their incomes have decreased. Another 40% said their incomes have decreased dramatically, while 36% say their welfare deteriorated partly. Only 2% of respondents said their welfare has improved slightly. No one saw any significant improvements.

The situation is disastrous. Utility bill debts have increased dramatically throughout the country. For instance, in Kiev alone, electricity bill debts reached 2.7 billion hryvnias as of February 2016 (nearly 100 million dollars – the current exchange rate averages 26.30 UAH/1 USD). The situation in Ukraine’s regions is even worse. The crisis is just beginning, given the upcoming increases of utility prices, devaluation of hryvnia, increase of arears of wages, pensions, etc. One can say that we are witnessing an inhumane countrywide experiment that aims to squeeze the last money out of the people. No one cares for such nuances as the population’s problems of survival or the operation of the utility enterprises that have no funds for repair of the energy networks and heat centers due to accumulated utility bill debts. The disastrous January of 2006 in Alchevsk, when more than 100,000 people were left without heating amid temperature below 40 degrees Celsius, may repeat throughout Ukraine as early as in autumn-winter 2016. For instance, Dnepropetrovsk with population exceeding one million people already alarms of abuses at the utility enterprises coupled with the growing utility bill debts that may result in a disastrous situation for the population.

The government’s efforts to find a way out of the situation through the so-called Strategy to Overcome Poverty by 2020 look like a bad joke or just a publicity stunt.

Ukraine’s authorities, and Yatsenyuk’s government, first, have found themselves in their own trap: they cannot refuse from increasing the utility prices, as it is a condition set in the memorandum with the IMF. Otherwise, they will not get another many-billion borrowing. Meantime, price hikes impoverish the population, amid increasing utility bill debts, fines, and confiscation of housing in exchange for debts. Yet, by autumn of 2016, most of the population in Ukraine will be nonpayers. This will ruin the country’s economy and pose more risks to the regime.

It has been well said, “Beware the fury of a patient man.”

Andrey Chesnokov (Kiev, Ukraine) for EADaily