Last Friday, Anatoly Kinakh, president of the Ukrainian Union of Industrialists and Entrepreneurs (UUIE), and Oleksandr Suhoniako, president of the Association of Ukrainian Banks (AUB), held a closed meeting.
It can be supposed that the high contracting (and much more often disputing) parties could not avoid turning their attention to what caused very cheerless results of economic performance in the first six months of this year. The governmental program, which promised reforms for the sake of well-being, forecast a 19% annual inflation rate, but this indicator jumped to 18.7% over six months alone. So from now on, any meeting of any sparring-partners will inevitably raise the question of who is to blame. This time, the industrialists must have been accusing the banking system of being isolated from the real economy by means of high credit prices, while the bankers must have been making their claims on former Red directors, still reluctant to accept the need to restructure Ukrainian industry. All this, however, did not keep the two sides from reaching an agreement on the AUB joining the Confederation of Employers controlled by the UUIE.
The National Bank (NBU) also has to parry accusations of being responsible for inflation upsurge. This is how NBU Governor Volodymyr Stelmakh began his press conference on July 7. He claims the current inflationary spiral is based on the “administrative decision” to raise utility rates and transport fares by over 10%. He called absolutely unjustified the 30% increase of telecommunication charges because, as he put it, telecommunications as a natural monopoly has always shown a profit. Mr. Stelmakh also blamed administrative measures for raised electric energy rates in large cities. In addition, he stressed the exclusive contribution Kyiv made to the jump of inflation. The capital, Mr. Stelmakh claims, accounts for 12% of the nation’s inflation.
Thus the National Bank became the first to throw down the gauntlet to the government, in fact accusing it of ignoring the interests of little Ukrainians about whom Viktor Yushchenko is so concerned, calling the bankers big people, perhaps for the sake of counterbalance.
On the other hand, Mr. Stelmakh thinks the National Bank has been doing well. Almost $700 million has been bought out in the six months, which has increased the economic turnover of money by UAH 3.5 billion. This helped the money base and money mass to grow by 13% and 18% respectively in six months. According to Mr. Stelmakh, these data show there was no monetary factor in causing the inflation, the main cause being administrative price hikes.
It is probably no accident that Mr. Stelmakh mentioned every time the baleful administrative influence on the economy. This gives the impression that there is no love lost between him and the government. As if to confirm this, the NBU chief announced openly about abrupt worsening of relations with the Ministry of Finance over the payment of securities debts the latter owes to the National Bank. Mr. Stelmakh said it is nonpayment of this large amount, UAH 1.8 billion, that brought additional pressure on the financial market and simultaneously helped the government achieve some progress on the social front, namely, to pay current pensions on time and reduce wages arrears.
It looks as if this National Bank news will blow fresh wind in the sails of parliamentary critics who intend to turn the Cabinet report on July 14 (Government Secretary Viktor Lysytsky has already called it “political”) into a new storming of the Bastille. The more so that the government is most likely to refuse to take the blame for inflation; on the contrary, it will emphasize the “reinforcement of positive tendencies” in the economy which are, unfortunately, visible only from Cabinet windows. The common citizens, mainly, pensioners and public-sector employees, whose real incomes have dropped by almost a fifth in the past six months alone, will have to postpone yet again their dreams of prosperity.
