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What’s keeping Ukraine’s economy afloat?

Что держит экономику Украины на плаву?

It’s time to admit the obvious: by 2016, the economy still collapsed. On the one hand, of course, Ukraine is a state, therefore, the structure is large and durable. Destructive processes in the States are usually years if not decades. Similarly, is usually quite a long time before the body is burning the life of a hedonist begins convincingly to protest against burgers and alcohol.


Let us recall the collapse of the USSR. Despite the horror of the nineties Russia’s GDP fell not so fast: in the worst 1992 GDP fell by 13%, and between 1990 and 1998, the decrease was “only” about 33%. About the same speed now falls and GDP of Ukraine. In 2014, the decline amounted to 7%, in 2015 — a further 10%. By the standards of the States is a lot, it’s actually a disaster.


However, with all this, the hryvnia stays rooted to the spot at the level of 27 hryvnia per dollar, inflation has not turned into a full-fledged hyperinflation, public sector wages and let the small delays, but are paid, the goods on store shelves are… Involuntarily the question arises — what is holding so far Ukraine’s economy afloat? The European Union, which now the problems with the roof, already knows how hard to explain to Ukraine that she was with him no chance. The U.S. state Department, until recently Ukraine dragged up every week toughens and tightens his remarks to the Kiev authorities:


The IMF, again, not only has transferred Ukraine next tranche, but also hinted that he would be willing to talk with Ukraine about the money only if Ukraine will advance in the negotiations with Russia on that very debt in 3 billion dollars. Slowly deflate even those industries that export their products. Even the scrap metal is ending — and, therefore, the Steelworkers will be in 2016 even harder:


Just in case let me remind you that in its present form, Ukraine’s economy is unsustainable, and it’s not a figure of speech. Ukraine is a relatively small country, in Ukraine there are no significant reserves of oil and gas. Therefore, since Ukraine can’t be independent, she must be deeply integrated into the economy of someone from big neighbors.


With Russia trade relations Ukraine has already been partially severed, the EU Ukraine normal conditions is not provided. There is only one way, down to total poverty and stagnation in remittances from migrant workers. In fact, no secret I’m not opening the door, almost of the same quality in Ukraine itself. The head of the National Bank of Ukraine Valeria Gontareva reported that because of restrictions of trade with Russia only in January, the state has not received 200 million dollars. The overall effect for the trade balance from a further deterioration of trade relations with Russia, she said, was estimated at minus $ 1.1 billion.


So, Ukraine was in a very difficult position. But the hryvnia, which has long been would have to devalue in the dust that refuses to fall below 27 per dollar. Why? Might explain the stability of the hryvnia, the application in Ukraine of those recipes that Americans worked in his time at the Latin American dictatorships. Small amounts of currency can be purchased with relative ease; those who are trying to translate into dollars at once tens and hundreds of millions of hryvnias, gently slap hands.



Clamping rate currency thus very harmful for the economy — at least for the reason that it creates a shortage of imported goods and drives inflation. But in the current situation, the future authorities of Ukraine try not to look, live one day. Not to be unfounded, here’s an article about the difficulties Ukrainian importers of gasoline:




As you can see, the currency in Ukraine is not enough even to purchase much-needed commodity, like gasoline. So, we have unraveled the secret? No. If the actions of the NBU was limited to preduzimanje importers, one would expect that the clip of the hryvnia will result in a deficit of gasoline in Ukraine or a sharp rise of price. However, does not happen neither that, nor another: gasoline at filling stations of Ukraine sold freely, and its price is modest yet 50 rubles per liter, as if the hryvnia continues to be translated in rubles and dollars, in any amount.


Therefore, unless we believe in miracles, there remains only one option — keep the hryvnia afloat by burning on the exchange of foreign exchange reserves. Probably, the national Bank of Ukraine throws a monthly basis to the exchange of a significant amount of dollars, and these dollars missing that the importer could bring to Ukraine the country goods. Very similar to the truth is an option, but… the volume of reserves of Ukraine not falling, but rising! And are now very impressive (for the country-bankrupt) 13.5 billion:






Yes. But there is a caveat. The availability of gasoline at the pump, as well as the hryvnia, we can check: not particularly to pomegreat. But when it comes to gold reserves, we must believe the National Bank of Ukraine on the floor. Understand where I’m going with this? Gold reserves of Ukraine are, roughly speaking, of two unequal parts. There is a money Bank of Ukraine, which he can use to support the hryvnia, and there are loans from the IMF that Ukraine has the right only to cherish. Quote from the August article of the Ukrainian RBC:




Receiving a next portion of aid from international donors did not fail to affect the volume of international reserves of Ukraine. In August they grew by 2.24 billion dollars. (21,6%) to more than 12.6 billion dollars. According to our estimates, the net reserves (gross reserves net of IMF credit) equal to 1.2 billion US dollars. It is much better than six months ago (when the net gold and currency reserves of Ukraine and all were negative) but still very little.


And financial markets know that the IMF imposes restrictions on the expenditure of its portion of foreign exchange reserves. So to say that Ukraine already has some notable monetary resource for foreign exchange intervention in case of need, everything else is not necessary. Let me remind you that in August 2015, Ukraine received from the IMF second tranche of 1.7 billion dollars. It was assumed that in October Ukraine will again get the money. In October Ukraine the money was not given, but it was expected that the money will be given later, in November-December 2015:




The IMF, however, nothing listed until now. And judging by the fact that the IMF now requires to perform it virtually impossible for the current Kiev authorities, the program of assistance to Ukraine is closed, at least temporarily.


Now let’s put the information we have.


1. Unknown to us the forces keeping Ukraine’s economy afloat: probably by the injection of currency exchange.

2. Ukraine’s IMF money, to spend it has no right, but to check the safety of which we can’t.

3. The IMF behaves as if he is very dissatisfied with the actions of Ukraine.


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Of course, I didn’t go with a candle in his hand, on offices of the NBU, however, it looks as if the Kiev authorities decided to prorate money allocated to them by the IMF. It fully explains how “phenomenal” the strength of Ukraine’s economy and the behavior of the IMF: the right to accuse Kiev of embezzling Christine Lagarde out of respect for the Americans, but the Americans, in turn, cannot in the present circumstances to force Christine Lagarde to give Ukraine more money.


If my assumption is right, then Ukraine currently burns every month to support the hryvnia several hundred million dollars of other people’s money. Soon, of course, will end and someone else’s money, but I wouldn’t be surprised if until the summer-autumn 2016 Ukraine will be able to endure.


However, to date, Ukraine has already closed the door almost all. Maybe, of course, I still underestimate the resourcefulness of the Ukrainian oligarchs, but I can’t even imagine where else they can turn to for money. To delay the outcome of the Ukrainian crisis at least 2017 they will not be easy.

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