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

Multimedia Brussels Schools, Metro Reopen Under Heavy Guard

City remains under the highest threat alert level due to what authorities have described as a 'serious and imminent' threat of attack

Video Debt-ridden Refugees Await Onslaught of Lebanese Winter

Aid agencies are attempting to reduce potentially devastating consequences of freezing conditions and snowstorms that killed eight last year, including three Syrian refugees

UN Warns Air Pollution in Asia Pacific Has Rising Cost

Globally some seven million people a year die prematurely due to indoor and outdoor pollution with about 70 per cent of those deaths in region

This forum has been closed.
Comment Sorting
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.
After Paris Attacks, France Steps Up Fight Against ISi
November 24, 2015 3:04 AM
The November 13 Paris attacks have drawn increased attention to Syria, where many of the suspected perpetrators are said to have received training. French President Francois Hollande is working to build a broad international coalition to defeat Islamic State in Syria and in Iraq. Zlatica Hoke reports.

Video After Paris Attacks, France Steps Up Fight Against IS

The November 13 Paris attacks have drawn increased attention to Syria, where many of the suspected perpetrators are said to have received training. French President Francois Hollande is working to build a broad international coalition to defeat Islamic State in Syria and in Iraq. Zlatica Hoke reports.

Video US, Cambodian Navies Pair Up in Gulf of Thailand

The U.S. Navy has deployed one of its newest and most advanced ships to Cambodia to conduct joint training drills in the Gulf of Thailand. Riding hull-to-hull with Cambodian ships, the seamen of the USS Fort Worth are executing joint-training drills that will help build relations in Southeast Asia. David Boyle reports for VOA from Preah Sihanouk province.

Video Americans Sharpen Focus on Terrorism

Washington will be quieter than usual this week due to the Thanksgiving holiday, even as Americans across the nation register heightened concerns over possible terrorist threats. VOA’s Michael Bowman reports new polling data from ABC News and the Washington Post newspaper show an electorate increasingly focused on security issues after the deadly Islamic State attacks in Paris.

Video World Leaders Head to Paris for Climate Deal

Heads of state from nearly 80 countries are heading to Paris (November 30-December 11) to craft a global climate change agreement. The new accord will replace the Kyoto Protocol on Climate Change that expired in 2012.

Video Uncertain Future for Syrian Refugee Resettlement in Illinois

For the trickle of Syrian refugees finding new homes in the Midwest city of Chicago, the call to end resettlement in many U.S. states is adding another dimension to their long journey fleeing war. Organizations working to help them integrate say the backlash since the Paris attacks is both harming and helping their efforts to provide refugees sanctuary. VOA's Kane Farabaugh reports.

Video Creating Physical Virtual Reality With Tiny Drones

As many computer gamers know, virtual reality is a three-dimensional picture, projected inside special googles. It can fool your brain into thinking the computer world is the real world. But If you try to touch it, it’s not there. Now Canadian researchers say it may be possible to create a physical virtual reality using tiny drones. VOA’s George Putic reports.

Video New American Indian Village Takes Visitors Back in Time

There is precious little opportunity to experience what life was like in the United States before its colonization by European settlers. Now, an American Indian village built in a park outside Washington is taking visitors back in time to experience the way of life of America's indigenous people. Carol Pearson narrates this report from VOA's June Soh.

Video Even With Hometown Liberated, Yazidi Refugees Fear Return

While the northern Iraqi town of Sinjar has been liberated from Islamic State forces, it's not clear whether Yazidi residents who fled the militants will now return home. VOA’s Mahmut Bozarslan talked with Yazidis, a religious and ethnic minority, at a Turkish refugee camp in Diyarbakır. Robert Raffaele narrates his report.

Video Nairobi Tailors Make Pope Francis’ Vestments

To ensure the pope is properly attired during his visit, the Kenya Conference of Catholic Bishops asked the Dolly Craft Sewing Project in the Nairobi slum of Kangemi to make the pope's vestments, the garments he will wear during the various ceremonies. Jill Craig reports.

Video Cross-Border Terrorism Puts Europe’s Passport-Free Travel in Doubt

The fallout from the Islamic State terror attacks in Paris has put the future of Europe’s passport-free travel area, known as the "Schengen Zone," in doubt. Several of the perpetrators were known to intelligence agencies, but were not intercepted. Henry Ridgwell reports from London European ministers are to hold an emergency meeting Friday in Brussels to look at ways of improving security.

Video El Niño Brings Unexpected Fish From Mexico to California

Fish in an unexpected spectrum of sizes, shapes and colors are moving north, through El Niño's warm currents from Mexican waters to the Pacific Ocean off California’s coast. El Nino is the periodic warming of the eastern and central Pacific Ocean. As Faiza Elmasry tells us, this phenomenon thrills scientists and gives anglers the chance of a once-in-a-lifetime big catch. Faith Lapidus narrates.

Video Terrorism in Many Forms Continues to Plague Africa

While the world's attention is on Paris in the wake of Friday night's deadly attacks, terrorism from various sides remains a looming threat in many African countries. Nigerian cities have been targeted this week by attacks many believe were staged by the violent Islamist group Boko Haram. In addition, residents in many regions are forced to flee their homes as they are terrorized by armed militias. Zlatica Hoke reports.

Video Study: Underage Marriage Rate Higher for Females in Pakistan

While attitudes about the societal role of females in Pakistan are evolving, research by child advocacy group Plan International suggests that underage marriage of girls remains a particularly big issue in the country. VOA’s Ayesha Tanzeem reports how such marriages leads to further social problems.

VOA Blogs