News / Europe

    Ukraine Economy Battered by Political Turmoil

    FILE - A man exchanges money at a currency exchange office in Kyiv April 10, 2014.
    FILE - A man exchanges money at a currency exchange office in Kyiv April 10, 2014.
    Squeezed by the current political unrest, Ukraine’s economy is deteriorating rapidly and Ukrainians are bracing for more hardship as the country’s new leaders fear a backlash over the introduction of austerity measures.

    The economy was flailing even before the February ouster of president Viktor Yanukovych.

    In the coming weeks, the removal of generous energy subsidies, tax hikes and severe cutbacks in government spending will start biting. Some 24,000 state workers and 80,000 police officers could lose their jobs, analysts say.

    Partly to meet conditions imposed by the International Monetary Fund in exchange for an $18 billion emergency loan, the country’s post-Yanukovych leaders have had little option but to start introducing austerity measures.  It’s their bid to haul Ukraine back from the “edge of economic and financial bankruptcy,” according to Ukraine’s prime minister, Arseniy Yatsenyuk.

    He has urged Ukrainians to be patient, arguing that the scale of the mismanagement of the economy under Yanukovych and the widespread corruption of the ousted president and his circle are to blame for the country’s plight.

    Massive theft charges

    Ukrainian officials say more than $20 billion of gold reserves may have been embezzled during Yanukovych’s rule, with more than $37 billion in loans disappeared. 

    In the past three years, more than $70 billion was shifted to offshore accounts from Ukraine’s financial system, they say.

    The country needs cash so it can recover as it labors with debts of $75 billion.

    “The economic and political challenges that Ukraine faces are enormous,” Lubomir Mitov, chief economist for emerging Europe at the Institute of International Finance, told reporters recently.

    The country’s currency – the hryvnia - has lost more than a third of its value against the dollar since last November, when anti-government protests in Ukraine began, and has been deemed the world’s worst performing currency so far this year. Ukraine’s central bank was forced this month to hike interest rates from 6.5 to 9.5 percent, adding to the economic pain.

    Analysts say the IMF deal and loan packages from the U.S. and the European Union will bring in another $9 billion.

    More aid needed

    But even such an additional infusion may not be sufficient to prop up Ukraine, with analysts arguing  that more assistance might be needed to avert economic collapse.

    Nick Piazza, chief executive of Kyiv-based investment firm SP Advisors, told the Financial Times this week that despite the austerity measures already taken “the country’s financial plan is still not realistic and needs further revision, including cuts in expenditures, till the end of the year.

    The danger is that Ukrainians won’t have patience with the economic hardship they are being asked to endure, analysts say.

    Anger over the parlous state of the economy fanned the flames of the uprising against Yanukovych.

    And pro-Russian separatist sentiments in the east of the country are being fueled now by the economic distress with locals claiming that the Donbas region, Ukraine’s industrial powerhouse, is enduring an unfair share of the hardship.

    Mikhail, an unemployed 27-year-old father of a small boy, said he doesn’t trust the government in Kyiv to help the east.

    “The new government in Kyiv is making everyone poorer and the people of eastern Ukraine can’t live with the politicians from the West anymore - they are out for themselves,” he said, inexplicably linking Ukraine’s new leaders to the ousted Yanukovych regime or referring to the West in general.

    Mykhail joined the pro-Russian separatists early on and says the east must hold a referendum. “And then we can join Russia like Crimea,” he said.

    The political unrest in the east is adding to obstacles on the road to economic recovery.

    Economic headwinds

    Even before the turmoil in the east erupted, the economy was forecast to shrink by three percent – an optimistic projection. If it contracts more than that, then even with the IMF package Ukraine could struggle to repay debts and could be forced by its biggest creditor, Russia, into technical default on its loans.

    With hourly average wages likely to decline by at least 15 percent this year, Ukraine’s minister for economic development, Pavlo Sheremeta, is pushing for an expansion of the tax base which he hopes will make the tax system simple and efficient.

    “We need to make it easy and simple for companies to complete their tax returns,” he said. “That way more money will come into government coffers.”

    Speaking to reporters in Kyiv last week, the U.S.-educated Sheremeta said his priorities include deregulation, cutting burdensome bureaucracy and tackling corruption. He also hopes to make Ukraine a place where foreigners will want to invest and where they can rely on the rule of law.

    He said that Ukraine is being handed a good opportunity by the European Union, which ahead of a formal economic association agreement slated for November, is lifting import barriers for many Ukrainian goods.

    “This is a unique opportunity for Ukrainian companies,” he said.

    You May Like

    Pentagon: Afghan Hospital Bombing Not a War Crime

    US Central Command's Joseph Votel says probe found tragedy was result of 'extraordinarily intense situation' that included multiple equipment failures

    US Minorities Link Guns with Other Social Ills

    New study finds reduction in gun violence could help lower America’s incarceration rate – the world’s highest - and improve relationships between police, citizens in minority communities

    US Millennials Beat Baby Boomers as Largest Living Generation

    America's young people are about to take over and here's what we can expect from them

    This forum has been closed.
    Comment Sorting
    Comments
         
    by: Doug from: Australia
    April 24, 2014 10:48 AM
    Yanukovich was seeking an emergency loan from Russia who offered to lend 15 billion. why would ukraine leaders allow someone to embezzle its countries gold and disappear it's loans then beg another country for money because they're broke. Where are the witnesses, the investigations, any form of evidence. Sorry but the facts displayed in this story have no evidence to support it.

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Turkish Kurd Islamist Rally Stokes Tensionsi
    X
    April 29, 2016 12:28 AM
    In a sign of the rising power of Islamists in Turkey, more than 100,000 people recently gathered in Diyarbakir, the main city in Turkey’s predominantly Kurdish southeast, to mark the birthday of the Prophet Muhammad. The gathering highlighted tensions with the pro-secular Kurdish nationalist movement. Dorian Jones reports from Diyarbakir.
    Video

    Video Turkey Islamists

    In a sign of the rising power of Islamists in Turkey, more than 100,000 people recently gathered in Diyarbakir, the main city in Turkey’s predominantly Kurdish southeast, to mark the birthday of the Prophet Muhammad. The gathering highlighted tensions with the pro-secular Kurdish nationalist movement. Dorian Jones reports from Diyarbakir.
    Video

    Video Pakistani School Helps Slum Kids

    Master Mohammad Ayub runs a makeshift school in a public park in Islamabad. Thousands of poor children have benefited from his services over the years, but, as VOA's Ayesha Tanzeem reports, roughly 25 million school-age youths don't get an education in Pakistan.
    Video

    Video Florida’s Weeki Wachee ‘Mermaids’ Make a Splash

    Since 1947, ‘mermaids’ have fascinated tourists at central Florida’s Weeki Wachee Springs State Park with their fluid movements and synchronized ballet. Performing underwater has its challenges, including cold temperatures and a steady current, as VOA’s Lin Yang and Joseph Mok report.
    Video

    Video Somali, African Union Forces Face Resurgent Al-Shabab

    The Islamic State terror group claimed its first attack in Somalia earlier this week, though the claim has not been verified by forces on the ground. Meanwhile, al-Shabab militants have stepped up their attacks as Somalia prepares for elections later this year. Henry Ridgwell reports there are growing frustrations among Somalia’s Western backers over the country’s slow progress in forming its own armed forces to establish security after 25 years of chaos.
    Video

    Video Bangladesh Targeted Killings Spark Wave of Fear

    People in Bangladesh’s capital are expressing deep concern over the brutal attacks that have killed secular blogger, and most recently a gay rights activist and an employee of the U.S. embassy. Xulhaz Mannan, an embassy protocol officer and the editor of the country’s only gay and transgender magazine Roopban; and his friend Mehboob Rabbi Tanoy, a gay rights activist, were hacked to death by five attackers in Mannan’s Dhaka home earlier this month.
    Video

    Video Documentary Tells Tale of Chernobyl Returnees

    Ukraine this week is marking the 30th anniversary of the world's worst nuclear accident, at the Chernobyl nuclear power plant. Soviet officials at first said little about the accident, but later evacuated a 2,600-square-kilometer "exclusion zone." Some people, though, came back. American directors Holly Morris and Anne Bogart created a documentary about this faithful and brave community. VOA's Tetiana Kharchenko reports from New York on "The Babushkas of Chernobyl." Carol Pearson narrates.
    Video

    Video Nigerians Feel Bite of Buhari Economic Policy

    Despite the global drop in the price of oil, Nigerian President Muhammadu Buhari has refused to allow the country's currency to devalue, leading to a shortage of foreign exchange. Chris Stein reports from Lagos businessmen and consumers are feeling the impact as the country deals with a severe fuel shortage.
    Video

    Video  Return to the Wild

    There’s a growing trend in the United States to let old or underused golf courses revert back to nature. But as Erika Celeste reports from one parcel in Grafton, Ohio, converting 39 hectares of land back to green space is a lot more complicated than just not mowing the fairway.
    Video

    Video West Urges Unity in Libya as Migrant Numbers Soar

    The Italian government says a NATO-led mission aimed at stemming the flow of migrants from Libya to Europe could be up and running by July. There are concerns that the number of migrants could soar as the route through Greece and the Balkans remains blocked. Western powers say the political chaos in Libya is being exploited by people smugglers — and they are pressuring rival groups to come together under the new unity government. VOA's Henry Ridgwell reports.
    Video

    Video Russia’s TV Rain Swims Against Tide in Sea of Kremlin Propaganda

    Russia’s media freedoms have been gradually eroded under President Vladimir Putin as his government has increased state ownership, influence, and restrictions on critical reporting. Television, where most Russians get their news, has been the main target and is now almost completely state controlled. But in the Russian capital, TV Rain stands out as an island in a sea of Kremlin propaganda.

    Special Report

    Adrift The Invisible African Diaspora