Yanukovych Praises Man Who Raises Taxes on Small Businesses

Yanukovych promised tax breaks for small businesses. Read his lips now.

And watch Mykhailo Brodsky’s 29 seconds of fame.

Yanukovych: You had...have no idea how many...enemies you’ve made over this short period of time. But I understand very well...who your friends and your enemies are. Your friends are entrepreneurs, and your enemies are officials...who...whose bread you’re taking away, so to speak. Because over the years, their pockets have reached their feet, you know.

Many entrepreneurs would argue the opposite.

And it’s not just those secondhand clothing dealers who supply Ukrainians with used but quality stuff they can afford.

Brodsky, who mixes his luxury lifestyle with deregulation rhetoric, wants flea markets out of business starting next year.

From Kharkiv to Lviv, thousands have protested the crackdown.







So if you read Russian, go to Brodsky’s blog and find out what people think.

The guy runs the State Regulatory Policy and Entrepreneurship Committee.

Video uploaded from: http://censor.net.ua/go/offer/ResourceID/172909.html
Original source: http://inter.ua

Yanukovych Preps Azarov for Ukrainian (Off-Air Leak)

Language barriers exist between Ukraine’s top two officials, in violation of the law.

Well, who gives a vuzeli about the laws and the languages anyway?

President Yanukovych [informal Russian]: Well, I’ll be addressing you...in the Ukrainian language. [switches to formal Ukrainian] Mykola Yanukovych [name, patronymic], I would like to hear you out...on the current situation — on issues of relevance.

Not quite as dramatic as Tymoshenko’s “everything’s gone” leak, but still didactic.

Keep them coming, guys!

Watch another snippet of the conversation.



Azarov gloats over the drought in Russia, which, he says, bodes well for Ukraine’s agricultural exports.

Which actually means the grain traders and VAT rebate folks will line their pockets, leaving the farmers with nickels and dimes.

Videos embedded from:
http://tabloid.pravda.com.ua/person/4c470acd5e2a1
http://censor.net.ua/go/offer/ResourceID/165648.html
Original source:
http://www.1tv.com.ua

As Tymoshenko Goes Solo, So Does Yanukovych

To debate effectively, the Effective Leader chose not to stand face to face with his rival. One debate year is one too many.

Enjoy these three Yanukovych solo videos from ICTV.

Video 1
He blasts Tymoshenko’s “see no crisis, hear no crisis” attitude and her unprofessional/inexperienced/irresponsible/smooth-talking team.

When Tymoshenko was saying there would be no crisis in Ukraine, it didn’t ask her — it came.

When...the situation began deteriorating, Tymoshenko started looking for an excuse and saying that crisis is all over the world, as it is in Ukraine. Our economy is going down. But when we looked at how it’s going down in Ukraine and how it’s going down in the world, we saw that Ukraine went down — it didn’t just go down, but it, so to speak, landed very badly — on its head.

Video 2
Punctuating his garbled speech with loan words, Yanukovych refutes criticism as mud-slinging, campaigns for effective and honest government, a government of aerobatics.

When you have the aerobatics, so to speak, then the people have the drive...[applause]...then...then you have the motivation, then life gets interesting.

Yanukovych talks about political shows as a way of life for the likes of Tymoshenko, for whom such recreation activities should be reserved.

Struggling for words and making awkward pauses, he finally discovers his wish for the Tymoshenko people:

...so that they would find ways to achieve satisfaction.

Video 3
When asked by a Russian reporter about Yushchenko’s decision to honor Bandera and Shukhevych, Yanukovych replied unconventionally and even upset the reporter, initially.

Yanukovych: In a fairly short time — in a fairly short time — I think our neighbors in both the West and the East will become convinced...that Ukraine...can live without being told what to do. [nods his head in self-confidence, audience explodes with applause, reporter gets royally pissed]

I often listen to us being...when we’re being talked to in a patronizing tone, and I, so to speak, I feel sorry for the state. [more applause]

Russian reporter: The question still remains: Will you or will you not annul these decrees if you become president?

Yanukovych: You really want me to tell you this?
Reporter: I'd like to fathom... [incoherent]

Yanukovych: I...I want...I want to tell you that we’ll have this system liquidated — the system...[applause]...so that in the future nobody will ever have such opportunities: When I grab power, I do whatever I want.

Hmmm...why does my my BS meter keep going off the charts all the time?

Videos embedded from:
http://censor.net.ua/go/offer/ResourceID/146882.html
http://censor.net.ua/go/offer/ResourceID/146884.html
http://censor.net.ua/go/offer/ResourceID/146886.html
Original source:
http://ictv.ua

Ukraine #85 Out of 182 on Human Development Index

Based on 2007 figures, one should add.

Which means that, given the 25% GDP contraction in Q1 2009 and the hryvnia's 60% devaluation, Ukraine's up-to-date ranking may be lower.

With real wages falling twofold, GDP per capita of $6,914 (PPP) — whatever its accuracy — is history now.

Bon Jovi - Living On A Prayer
bebepanda

Sources:
http://pravda.com.ua/news/2009/10/6/102777.htm
http://hdrstats.undp.org/en/countries/country_fact_sheets/cty_fs_UKR.html

Ukraine Low on 'Prices and Earnings' by UBS

More mapping — this time from UBS, Europe's second-largest bank or “the world's biggest manager of other people's money” as The Economist calls it. (Well, there’s no escaping death and taxes.)

First published in 1971, Prices and Earnings offers a gauge of what people make and what they can buy with it, in any given city.

This nuanced comparison of purchasing power around the globe is a must-read for pundits who keep tabs on the Big Mac Index, Mercer cost of living surveys, GfK purchasing power studies, etc.

So where does Kyiv rank? Not very high.

On average, it takes 82 hrs of work to buy an iPod Nano in Kyiv, compared to 10.5 hrs in Toronto, 9 hrs in New York, 36 hrs in Moscow and 45.5 hrs in Warsaw.

Sources:
http://www.ubs.com/1/e/wealthmanagement/wealth_management_research/prices_earnings.html
http://www.ubs.com/1/ShowMedia/wealthmanagement/wealth_management_research/prices_earnings?contentId=170298&name=PreiseLoehne_2009_e.pdf
http://kiyany.obozrevatel.com/news/2009/8/28/55966.htm

Ukrainian Hryvnia 49% Undervalued, According to Big Mac Index

After a two-year hiatus, The Economist has finally updated its Big Mac Index.

Since 2007, Ukraine's currency, the hryvnia, has lost 50% of its value against the dollar. The change in the hryvnia's undervaluation has been less dramatic but remains staggering: from -41% to -49%.

While not scientifically precise, this rate makes for good comparison shopping: It makes Ukraine a Third World country.

It comes on the heels of just about every other index that leaves us far behind the developed world, despite Ukraine having an aerospace industry.

And as world metal prices are picking up, it comes as terrifically good news for our energy-inefficient commodity-cursed oligarch-controlled McDonbas economy.

Ours is an economy that thrives on cheap labor and cheap natural resources. The outcome? Poor living standards. A net population loss of more than 6 million people during the last 18 years.

Why reform? Why fight corruption? Why invest in energy-efficient equipment? Why diversify the economy? Why pay Ukrainian workers decent wages if they can survive on $300 a month without protesting like those German workers who make $30 an hour?

Just pay the damn Ukrainians their slave wages. Don't let them earn enough to buy homes. Let them blow up in coal mines. Let them drink. Let them stay depressed. Let them die out so we can have the land, too. After all, unless they can make us treat them better, they deserve no better treatment. Therefore, let 5 percent of the population prosper and let the rest struggle.

Meanwhile, we the oligarchs can pollute, we can exploit and we can export. We can pump billions of dollars into offshore accounts. Hell, we can even spend a few million dollars on charity! Just keep the hryvnia undervalued. Let the Ukrainian Dream remain just that — a dream!

Sources:
http://www.economist.com/businessfinance/displaystory.cfm?story_id=14036918

Yushchenko Talks to Himself

He expects Ukraine to post a 20-23% GDP contraction in Q1. He bewails the country's 145th position on the Doing Business 2009 index. He even elaborates on Lenin’s famous quote “You’re on the right path, comrades!”

Who is he? A former communist. A former banker. A former PM. A former MP. Ukraine’s current president. A man who vowed to separate business from government, put the corrupt ones in jail and lead Ukraine up the economic ladder.

President Yushchenko: The World Bank gives the following estimates of the attractiveness of the entrepreneurial environment: Ukraine, based on 2008 figures, occupies the 145th position...[long pause]...145th...out of the...like, 175 countries analyzed in the given group. Before that, a year ago, we ranked 139th. So I just want to say that, “You’re on the wrong path, comrades!”

There’s another one: the Index of Economic Freedom. Ukraine ranks 152nd out of the 179 countries surveyed.

It’s the economy, Mr. President! It's the obsolete, commodity-cursed, energy-inefficient, oligarch-controlled economy. And you don’t preach Capital when you meet with the oligarchs, do you?

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Original sources: http://5.ua

A Braidless Tymoshenko Outlines Ukraine-IMF Cooperation

Did she sell her braid too? Or is she just unhappy about Lutsenko’s behavior?

PM Yulia Tymoshenko: The board of governors of the International Monetary Fund, uh — considering the effective work of the government in implementing, uh, the preliminary measures of the joint program between Ukraine and, uh, the IMF — has made a decision to speed up the meeting of the board of governors, uh, from, uh, May 12, as planned — from May 13, as planned — to May 8, and, on May 8, the board of governors will review the issue of granting the [second] tranche to Ukraine, and it’s a very positive signal.

In Ukrainian, IMF translates into МВФ (spelled em-veh-ef). Tymoshenko spelled it the English way: АйЕмЕф (ai-em-ef), in a nonstandard jargon-style manner characteristic of showy English-speaking Ukrainian yuppies. (To the best of my knowledge, Tymoshenko does not speak English. Well, except for the “Happy Birthday” thing.)

I digress. So why is the second portion of the IMF loan a “very positive signal?” Where did the first portion of the loan go? Wasn’t it funneled into Ukraine’s bad-loan-infested banks, most of them foreign and oligarch-owned?

Will the green light from the IMF help Ukrainians improve their living standards or will it help them pay off the bad loans with their cheap labor?

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Original source: http://5.ua

Bankers Beg for Customers

They need us. But do we need them?

Serhiy Naumov, chairman of Ukrsibbank: In fact, we’re all in the same boat. We’re doing everything possible to stabilize the hryvnia situation. We’re also asking you to...finally bring the money to the banks, make our economy work.

Bring the money to the banks? Only to have the banks refuse to give the money back when you need it?

Hasn’t the government poured billions of hryvnias into troubled banks without demanding equity stakes from them?

Isn't it true that the banks then used the stimulus money to bet against the hryvnia, with a little help from the National Bank?

Video uploaded from: http://censor.net.ua/go/offer/ResourceID/116043.html
Original source: http://ictv.ua

Forbes: Pinchuk Tops Akhmetov As Ukraine's Richest Man

Times are tough.

Viktor Pinchuk, net worth $2.6B, has taken the lead in Ukraine, according to the The World’s Billionaires 2009, beating Rinat Akhmetov, net worth $1.8B.

Compared to last year’s rankings, Ukraine has lost three billionaire slots.

It’s even more of a cold shower if you compare it to the June 2008 rankings by Korrespondent/Dragon Capital.

Sources:
http://www.pravda.com.ua/news/2009/3/12/91196.htm
http://www.forbes.com/lists/2008/10/billionaires08_The-Worlds-Billionaires_CountryOfCitizen_25.html

http://www.forbes.com/lists/2009/10/billionaires-2009-richest-people_The-Worlds-Billionaires_CountryOfCitizen_16.html

http://www.forbes.com/lists/2009/10/billionaires-2009-richest-people_The-Worlds-Billionaires_CountryOfCitizen_17.html

Ukraine Teeters, Yushchenko Twitters

This headline jumped into my mind after I matched this IHT article with the blogosphere’s reaction to Yushchenko’s microblogging debut.

President_UA twitters about “himself” in the third person, copying and pasting from his official website. To me, it further highlights Yushchenko's interest in publicity and his detachment from Ukraine's teetering.

It's about time Tymoshenko set up a Twitter account, too.

Sources:
http://iht.com/articles/2009/03/02/europe/02ukraine.php
http://globalvoicesonline.org/2009/02/25/ukraine-politics-on-twitter/

Yushchenko Calls $5B Loan 'Molotov-Ribbentrop Protocol' (Updated)

Speaking at a national security meeting Tuesday, President Yushchenko breathed fire at PM Tymoshenko’s dealings with Russia and emphatically denied role in corrupt gas schemes.



I translated some of the juicy quotes (as originally quoted by Ukrayinska Pravda):

The hardest thing morally and psychologically is to comment on the fact that behind these two grand gas agreements a secret Molotov-Ribbentrop protocol was made, when it comes to the $5B loan on the part of Russia.

I find it revolting that, as part of the consultations, without the approval of the head of state, without the approval of parliament, the zero option is being considered.

See No. 11 where it says “the prospects of ratifying the zero option agreement.”

These are serious questions for the Ukrainian nation, ones that should not depend on the improvisation of one person, regardless of the person’s high rank.

The most cynical argument of the last few years was this: work without intermediaries. Should I say the government is working poorly, I get accused of being related to RosUkrEnergo.

I don’t want this, I’m sick of this. I was not involved in your stinky gas for a single day in my life — [it’s not true] that I had some sort of private interest in it, that either I or my family had some private interest in it! I have the honor to say this time and again.

“Not a single word of Mr. Yushchenko is true,” Tymoshenko struck back.

More quotes from Tymoshenko:

As Prime Minister, to cover the planned budget deficit, I contacted several countries to get loans as usual. Today, I’m having talks with all the countries, and all this hogwash that is being said — about some zero options, about the betrayal of national interests — these are non-negotiables.

If we manage to agree with any country in the world, it will be just a simple loan agreement with a market interest rate.

I haven't seen it for the life of me. There’s no Prime Minister’s signature on it. I don’t know where these photocopies came from.

Sources:
http://www.pravda.com.ua/news/2009/2/10/89393.htm
http://www.pravda.com.ua/news/2009/2/10/89395.htm
http://www.pravda.com.ua/news/2009/2/10/89399.htm
http://www.pravda.com.ua/news/2009/2/10/89401.htm
Video uploaded from:
http://censor.net.ua/go/offer/ResourceID/113160.html
Original source:
http://5.ua

Tymo Seeks $5B Loan from Russia to Plug Budget Holes

At a time when Russia is nearly suing Ukraine — thus eroding Tymoshenko’s reassurance that neither side would sue the other — Tymoshenko decides to borrow some money from Russia.

Instead of heeding the call to balance the budget, voiced by President Yushchenko and Finance Minister Pynzenyk, she takes her business elsewhere.

On Thursday, she sent a delegation to Moscow angling for a loan of $5B at an interest rate of LIBOR +8 to +9% for a period of 5 to 7 years, Dzerkalo Tyzhnia reports. Ukrayinska Pravda obtained a copy of the delegation's directives.

In Ukraine, the buck never stops. In Russia, they made big bucks during the oil boom. Like the IMF, they know what they want, and their interests never stop with the interest rate.

As a condition of granting the loan, Moscow requests the following:

• Ratification of the so called “zero option” agreement whereby Russia assumes liability for all debts owed by the USSR while the other former Soviet republics abandon their respective claims on assets owned by the USSR

• Resolution of disputes concerning Ukraine’s claims on Soviet property abroad and Russia’s claims on property in Ukraine

• Recognition of debts owed by Ukrainian enterprises to Vneshekonombank as government debt

Is that too much to ask? Tymoshenko doesn’t think so.

So there she is, beating a path to Putin’s door, trading favors, and doing whatever it takes to get the presidency — whatever the cost.

It must have been the missing link in her Ukrainian Breakthrough program.

Tymoshenko has admitted to getting Russia's approval for the loan, but has denied accepting the conditions listed above.

"It's not true," she said, despite the “zero option” being clearly stated as No. 11 in the directives.

Sources:
http://www.pravda.com.ua/news/2009/2/7/89267.htm
http://www.pravda.com.ua/news/2009/2/7/89279.htm
http://www.pravda.com.ua/news/2009/2/7/89285.htm
http://www.dt.ua/2000/2020/65376/

Yushchenko Blames Tymoshenko, Urges 'Realistic' Budget Amendments

On Friday night, President Yushchenko addressed the nation, hitting the media circuit at prime time, when hordes of Ukrainian politicians go talk show shopping.

Naturally, he tried to blast his way through PM Tymoshenko’s vices and into the hearts of voters. He then made an urgent appeal to parliament to amend the budget so as to make it more realistic in view of the snowballing economic woes.

The thrust of the President’s rhetoric can be described as “the pot calling the kettle black,” with the notable exception of the gas issue and, yes, the dire need to fix the budget.

I decided to translate excerpts from his speech. Click here for the full official translation.

Dear countrymen,

I have made a decision to address you in order to provide a clear and honest assessment of the economic, budgetary, and financial situation in Ukraine.

I appeal to you, dear countrymen, to augment my demand to the Ukrainian government and the parliamentary majority to stop the torrents of lies, falsehood, and slander and to urgently, I repeat urgently, act to save the national economy.

The state has a totally unbalanced financial system.

State institutions are being knowingly ruined due to lack of funding. That is not to mention the personal accusations. I reject this mud.

Ukrainian industry is grinding to a halt. People are being laid off en masse or put on longterm furlough.

In Moscow, Prime Minister Yulia Tymoshenko signed gas agreements disadvantageous for Ukraine.

The contracts do not meet my directives. The Prime Minister made the decision on her own, without the collegial opinion of the government.

The explanation must come from the majority that supports Yulia Tymoshenko — from her Bloc to the Communists.

The state is left holding the bag. The contracts have been signed and they must be honored.

In 2009, Ukraine has to pay 25 billion hryvnias more for gas than last year. Still, NAK Naftogaz’s revenues from transit services remain unchanged since 2008.

Every minute counts now.

I demand that amendments be made immediately to the State Budget 2009. This is the only way to rectify the situation. I warned the government and the parliamentary majority, key authors of the State Budget for the current year: The document you made is a castle built in the air.

As of today, the government has not collected even half of the planned January taxes and levies. Again, there is one cause: an unrealistic budget.

I appeal to Yulia Tymoshenko and her organized majority. This is your responsibility. Dear Yulia Volodymyrivna, you knowingly built into the budget the overblown figures and promises that you cannot fulfill today. The money is not concentrated but scattered, which includes the allocations made for the next [Soviet] savings payout.

On behalf of the entire country, I demand that the government and parliament immediately prepare an honest budget, where expenditures would fit the economy’s capabilities.

This is your constitutional, state, and political responsibility.

I repeat: The full brunt of responsibility, according to the Constitution, for the economic situation, for disrupting the budget process, for ruining the banking system, lies personally with Prime Minister Yulia Tymoshenko.

Having reached a critical point, she will not be able to hide in the opposition.

Enough lies.

I call on all countrymen to remain calm.

You will be protected. We have the ability to protect both the country and the people. Presently, the first and foremost important thing is to find the political will, courage, to pass a realistic 2009 budget for the country.

To achieve that, I will use every lever necessary in times of crisis.

Thank you for your attention.

Two hours later, Tymoshenko’s response appeared on the Cabinet of Ministers’ website.

The government and the parliamentary majority are working around the clock and, on behalf of them, I call on the President: If you are not helping, then at least do not interfere.

The world and Ukraine are in crisis. I will not sugarcoat the situation, nor will I let anyone sow panic.

To combat the crisis, we need political consolidation, a cold and sober mind, nerves of steel, a strong will, resolve, and a deep sense of responsibility — that is exactly what Viktor Andriyovych [Yushchenko] has always lacked, lacks, and will lack.

Video uploaded from: http://censor.net.ua/go/offer/ResourceID/112075.html
Original video source: http://5.ua

When Arbitrage Doesn’t Work

High rate, low rate. Buy low, sell high. Pocket the difference.

Not so fast.

Narrator: The sellers are trying to save the situation and are even playing into each other’s hands. In Kyiv’s Podil, side by side there are two currency exchange outlets of different commercial banks. In one, they buy the dollar at Hr. 6.65, in the other they sell the dollar at Hr. 6.45. But the thing is, in the “cheap” kiosk you can only sell the dollar at Hr. 6.15, while in the “expensive” one you can only buy the dollar at Hr. 6.95. Vikna did an experiment: We bought 10 dollars at Hr. 6.95, and a few minutes later, in that same place, we tried to sell them at Hr. 6.65. Still, once again, the kiosk didn’t have even 70 hryvnias in store for us.

Reporter [edited for clarity]: You should at least have enough hryvnia for 10 dollars, right?

Kiosk manager: [struck speechless, produces a “you got me” smile while chewing gum]

Reporter: I just sold you 10…
Kiosk manager: Yes, you did.

Reporter: I just bought 10 dollars from you, so you should have something in the way of hryvnia for that 10 dollars, right?
Kiosk manager: Well, I do.

Reporter: Then why did you…why didn’t you take the dollars from this man?
Kiosk manager: [gives a guilty look]

Well done, Vikna!

Video uploaded from: http://censor.net.ua/go/offer/ResourceID/100955.html
Original source: http://www.stb.ua

MPs Scuffle As Dollar Shoots Over Hr. 7

In Thursday morning trading on the streets of Kyiv, the asking price for the U.S. dollar reached Hr. 7.0942, up from Hr. 6 last Friday. Some banks offered the dollar at a price as high as Hr. 7.4, Ekonomichna Pravda reports.

Now look at those dudes. Reaching across the aisle is a squad of BYuTies who came to NUNSville to extract the absentees’ voting cards there and thus ensure in-person voting.

Speaker Arseniy Yatsenyuk: I call on your faction to return to your sector. Break, comrades! Split up!

Did he say sector? He should have said ward!

Sources:
http://www.epravda.com.ua/news/490975220f668/

Video uploaded from: http://censor.net.ua/go/offer/ResourceID/100837.html
Original source: http://stb.ua

Ukraine Ranks 64th of 104 on 2008 Legatum Prosperity Index

According to this year's study by the Legatum Institute, “Ukraine ranks amongst the lowest of the European states at 68th overall, on a par with Macedonia.” (h/t Ukrayinska Pravda)

The study ranks countries on economic competitiveness and comparable liveability, both of which contain a variety of sub-rankings.

Particularly interesting is the finding that Ukraine’s “Economic Competitiveness rank (45th) is substantially higher than its Comparative Liveability rank (91st).”

Below are some of the other excerpts from Ukraine’s country profile:

In terms of liveability, Ukraine scores very poorly on many indicators, including income. The health situation is particularly alarming: 49% of the population is dissatisfied with their personal health, and health-adjusted life expectancy is under 60 years. HIV prevalence is the highest in the region, and the population is decreasing by almost 1% annually, a trend which is amplified by massive emigration both towards the West and to Russia.

Although unemployment is relatively low, Ukraine is marked by a perceived lack of opportunity. A significant proportion of the citizens are dissatisfied with the freedom to choose what to do in life and do not believe they can get ahead by working hard, according to the Gallup World Poll.

For cross-country comparison-shopping, Legatum offers a tool called Prosperiscope™. Using this tool, you can compare:

Ukraine to the U.S.
Ukraine to Canada
Ukraine to the UK
Ukraine to Germany

Sources:
http://www.pravda.com.ua/news/2008/10/20/83090.htm
http://www.dw-world.de/dw/article/0,2144,3725069,00.html
http://www.prosperity.com/country.aspx?id=UP

Lukashenka Likes Himself

Belarusian President Lukashenka: Heaven forbid us from Ukrainian scenarios. Democracy is when and where it’s the people that live decently, and not a bunch of those ‘great opposition activists’ whom you just mentioned. So one should take it easy — the way I take it easy. A dictator? Fine, a dictator. There’s a certain benefit to it, tough: the last one — can you imagine? — the last one! Had you not come here, where in your life would you have met him and talked to him?

Alyaksandar “Batska” (“Father”) Lukashenka has elected himself another opposition-free parliament.

What keeps him in power so long, aside from his authoritarian ways?

Lower energy costs and lower corruption. Compare Belarus’ GDP per capita of $10,900 (PPP, 2007 est.) to Ukraine’s $6,900.

There are no billionaires in Belarus.

Video uploaded from: http://censor.net.ua/go/offer/ResourceID/97679.html
Original source: http://kanalukraina.tv

Agflation Attacks!

Intro: Inflation in Ukraine has beaten all forecasts. Since the beginning of the year, it has reached 10 percent, while the Finance Minister had forecasted a rate of 9.6% for the entire year. World Bank experts come up with even grimmer forecasts — 20 percent by year-end. Still, aside from pessimistic forecasts, the world’s economists also issue some useful tips. Tasha Trofimova spoke with the economists.

Narrator: Today, even kids know about inflation. A school cafeteria makes for a better study than any economics class.

High school student: [A slice of] pizza was 1.80/$.36 and now it’s 2.20/$.44.

Narrator: For several weeks, the girls’ pocket money budgets have failed to make both ends meet. A while ago, 5 hryvnias was enough to cover their daily cafeteria joys of life. Now, it’s twice as much.

High school student: My parents give me money based on prices. Food is very expensive.

Narrator: The high school students’ observations are borne out by the State Statistical Committee. Food prices rose the most throughout the year, by almost 40 percent. Transportation, health care and housing are slightly below that rate. But already, everything costs more. Inflation, of course, was predicted but not at such a rampant rate: Officially, the expected rate was 9.6% for the entire year, but it’s already one percentage point above that figure. And that’s hardly the end of it. Officials are not hesitating with their forecasts; independent experts are waxing eloquent.

Mykhailo Kolisnyk, economist: In this case, I’d talk about an inflation rate of 12% and possibly up to 30%.

Narrator: Officials are no longer as optimistic as they were at the beginning of the year. Measures to rein in inflation were today discussed by the President, the Prime Minister, and the Speaker of Parliament.

President Yushchenko: We should take the most robust of measures to bring balance to the situation, because it’s impossible to explain to people why we should have such a high inflation.

Narrator: The President is demanding a budget overhaul to protect the poorest and to raise the minimum living level to 515 hryvnias [$103]. Adding a few more hryvnias worth of welfare to the underprivileged would, according to preliminary estimates, swell the budget by an additional UAH 70 billion [$14 b]. That scares the World Bank economists. They offer different advice: By all means, do not raise spending and do raise utility bills immediately.

Martin Raiser, World Bank representative in Ukraine: Natural gas prices have risen. The country is already paying more, but the domestic consumer — the housewife — is paying less. Raising utility bills would be a lot more efficient. It would harness inflation, and in a year or two would harness gas consumption, resulting in further savings.

Narrator: Energy efficiency is a good thing, our economists are saying, but rising utility rates would make our people panic even more. We should care about production, not elections.

Yaroslav Zhalilo, economist: Starting with 2004, there’s been a craze for outpacing…for handing out money to the populace. That doesn’t mean that the populace has too much money. Living standards remain not high enough, but this results in outpacing, measured against productivity gains and production growth.

Narrator: Here’s the advice for ordinary Ukrainians: Tighten your belts and, with a good political and economic strategy, putting the brakes on inflation will be a matter of three to four months. That said, school cafeteria prices will hardly fall. Tasha Trofimova, Serhiy Haransky, Ilya Hnedash, Novy Kanal.

Tymoshenko’s Keynesian electioneering appears to be stumbling amid the raging agricultural inflation, or agflation, a trend that grips the globe.

Globally, agflation can be traced to an expanding global middle coupled with increased and oft-subsidized biofuel production, which distorts the full cost of biofuel.

While rising incomes ramp up food demand, increased biofuel production creates a host of negative externalities such as cropland diversion, deforestation, and greenhouse emissions. This two-pronged attack robs the poorest nations of much of their daily diets, sparking food protests across the globe.

Locally, many believe that Tymoshenko’s policy of compensating Ukrainians for a fraction of their Soviet savings has added fuel to the agflationary fire.

The idea of giving back some of the value that Ukrainians scrimped and saved while creating value in the now grabitized Soviet economy has met stiff resistance from Regionomists — and quite understandably so.

However, from an economically sound ethical perspective, the idea can only be criticized for bad timing, inflation risky mechanisms, and insufficient indexation.

Ukraine’s economic policies have been prone to extremes. Printing money was one of them. Excessive monetarism was another. The post-hyperinflation era swept a cadre of supply-side consultants from the IMF and the World Bank into the Ukrainian government. These brilliant folks confined the Ukrainian economy to a dollarized monetarist straightjacket, with a 40-percent undervalued hryvnia.

Without transparency policies, the World Bank’s calculus leads us nowhere. The housewife’s main problem is not paying too little for gas; it’s knowing too little about the gas she’s paying for, both as a consumer and as a taxpayer. In a country where huge quantities of gas create huge fortunes overnight, triple-charging the housewife will not solve the problem.

No matter how inefficient the economy and no matter how small the productivity gains, we still have companies that show fifteen-fold leaps in profitability. Talk about inflation.

Far from living in a free-lunch economy, Ukrainians should pay their bills and know what they’re paying for. This simple measure would deflate the bulk of Ukraine's economic problems.

Video uploaded from: http://video.novy.tv/reporter/reporter_2008_04_07-05.htm

Ukraine a Borderline Case on 2008 Index of Economic Freedom

This year’s Index of Economic Freedom, compiled by The Heritage Foundation and The Wall Street Journal, features Ukraine as one step from the "Repressed" economies of Russia, Vietnam and Guyana.



The Index rates countries based on ten freedoms: business freedom, trade freedom, fiscal freedom, freedom from government, monetary freedom, investment freedom, financial freedom, property freedom, freedom from corruption and labor freedom.

Ukraine ranks a dismal 133rd out of the 157 countries surveyed, and occupies the last slot in the "Mostly Unfree" category.

Sources:
http://www.heritage.org/research/features/index/countries.cfm
http://www.heritage.org/index/country.cfm?id=Ukraine