Monday, Septebmer 16
The Rada starts to review the 2020 state budget tomorrow. Highlights from the budget as presented Sunday to reporters by Prime Minister Oleksiy Honcharuk and Economy Minister Oksana Markarova
- The deficit decreases slightly, to 2.09%, from 2.3%. Overall spending is to be $46.5 billion. The government’s goal is a ‘deficit-free’ budget in 2022-23, Honcharuk said.
- Defense spending increases by $1 billion to $10 billion. Markarova told reporters: “It’s too much.”
- The budget provides $4.8 billion for education, $3.8 billion for health care, $2.5 billion for roads, $300 million for culture, and $156 million in agriculture subisidies, largely to small farmers.
- The government plans to borrow $15 billion in 2020. By the end of 2020, the public debt to GDP ratio should fall to 46.7%, predicts Markarova.
- Sales of state companies should bring $200 million to the budget in 2020. By contrast, this year, ‘small privatizations’ might bring in only $35 million.
- The budget is calculated on an average exchange rate of 28.2 hrvnia to the dollar. The current rate is 25 hryvnia to $1.
- “Taxes need to be gradually reduced,” Honcharuk said. “It is wrong when taxes are high, and a small part of the business pays them. This is very unfair.” The government plans an overhaul of the code next spring.
President Zelenskiy invited foreign investors attending the Yalta European Strategy forum on Friday to evaluate a string of new projects: a new Ukrainian resort city on the Black Coast; two new Carpathian ski resorts — Slavske and Borzhava; ‘a large amusement park for guests of Eastern and Central Europe’; land irrigation in Kherson; a university-IT cluster in Kharkiv, and a film production studio in Kyiv. Hindering his international marketing, the presentation slides were in Ukrainian.
“Ukraine Poised to Seal Three-Year IMF Loan of About $5 Billion” Bloomberg reports from Yalta Economic Strategy forum on Saturday. The extended fund facility would be for three years, according to “three people familiar with the matter.” The agreement would be conditioned on: tackling corruption, cutting the budget deficit, and creating a market for farm land. In speeches and bills for the Rada, the government supports all three goals. It is unclear how an IMF pact would be affected by Ihor Kolomoisky’s effort to win compensation for the Dec. 2016 nationalization of his bank, PrivatBank. Although Kolomoisky and the two leaders of the IMF for Ukraine attended the Forum on Friday, it is not known if they met.
With President Zelenskiy in power, Kolomoisky sees room for an amicable solution over the Dec. PrivatBank, the nation’s largest bank. “There is a good window of opportunity today,” Kolomoisky told reporters Friday at the Yalta European Strategy forum in Kyiv. “We (PrivatBank’s former owners) do not agree with the nationalization. This dispute is easier to resolve today than under the previous president.” He said that when he met with President Zelenskiy two days earlier, PrivatBank was not discussed.
Fitch Ratings has upgraded Naftogaz’s long-term foreign-currency bond default rating to ‘B,’ from ‘B-‘. The outlook is positive. The upgrade equalizes Naftogaz’ rating with those of the sovereign and of Ukrzaliznytsia.
MHP, the nation’s largest poultry producer, has placed a 10-year, $350 million at 6.25%, reports Bloomberg. Coming as Fitch Ratings upgraded MHP’s issuer default rating to ‘B+’, from ‘B’ the bond has the lowest yield on record for MHP. Dragon Capital notes that the bonds will largely refinance MHP’s short term debt, writing: “We do not expect MHP’s net debt to increase following the new Eurobond sale.”
International Development Finance Corporation, formerly known as OPIC, plans to expand its backing of investments in Ukraine, John Didiuk, the agency’s veteran Ukraine representative, tells the US-Ukraine Business Council. Although often faulted for moving slowly, the Corporation has two benefits for US-related investments in Ukraine: low interest rates and the aura of US political backing for a project.
An energy exchange based on a modern clearing and trading system in Ukraine is planned for launch by 2021, Timur Khromaev, head of the National Commission for Securities and Stock Market says after signing an agreement with the USAID Energy Security Project. Khromaev writes on Facebook that the move is part of a wider preparation of laws for the development of organized trade in commodity markets in Ukraine.
Pushing for a peace deal, President Zelenskiy expects to meet with President Trump in the US in one week, and, days later, in Paris with President Putin, Chancellor Merkel and President Macron. “We look forward to seeing the leaders of the four countries in the ‘Normandy’ format,” Zelenskiy told the Yalta European Strategy forum Friday. “We are waiting for this meeting at the end of September.” However, he cautioned that sanctions on Russia should be retained and that he does not want the Russia-controlled section of the Donbas to become like the breakaway Moldova region of Transdniestria, where Russian troops are permanently stationed.
Ukraine is negotiating an ‘all for all’ exchange of prisoners with Russia, Andriy Yermak, Ukraine’s chief negotiator, tells the Financial Times. A trade could result in the freedom of as many 350 Ukrainians held captive in Russia and Russia-controlled Crimea and Donbas. The Sept. 7 prisoner swap proved enormously popular in Ukraine, strengthening Zelenskiy’s hand to win quick approval in the Rada of legislation for free-market economic changes.
With wide margins, the Rada voted last week to approve in the first reading:
- A concessions law for the private operation of such public property as sea and river ports, roads, and airports
- A law to protect and encourage whistleblowers, people who accurately report specific cases of corruption. Whistleblowers are to be paid 10% of the funds defrauded from the government – up to $1 million.
- The introduction of a national electronic transit system and a single, EU standard customs declaration. This is to allow the exchange of customs information in real-time with 35 European countries.
- The abolition of the current list of state companies protected from privatization.
- The lifting of restrictions on private companies launching rockets into space.
- A law to speed up the procedures for a second reading.
From the Editor: At first glance, the theme of this year’s YES Conference seemed a mite soft: ‘Happiness Now.’ However, it proved to be a masterstroke by Victor Pinchuk, the organizer and patron. With the arrival of the Zelenskiy government, pollsters report that optimism in Ukraine is hitting record levels. The YES panels were a positive antidote to Kyiv’s chattering classes who open worry about optimism and confidently reassure readers that it will all be over by Christmas. Best regards, Jim Brooke email@example.com.