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

Photogallery Snowstorm Sweeps Northeastern US

'This is nothing like we feared it would be,' New York City Mayor Bill de Blasio says; he had earlier warned storm could be one of worst the city has ever faced More

Millions of Displaced Nigerians Struggle With Daily Existence

Government acknowledges over a million people displaced in 2014 due to fight against Boko Haram insurgency More

Facebook: Internal Error to Blame for Outages

Temporary outage appeared to spill over and temporarily slow or block traffic to other major Internet sites More

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.
Obama Urges Closer Economic Ties During Historic India Visiti
X
Aru Pande
January 26, 2015 9:33 PM
U.S. President Barack Obama says the United States and India must do better to capitalize on untapped potential in their economic relationship - by removing some of the roadblocks to greater trade and investment. As VOA correspondent Aru Pande reports from New Delhi, Obama spoke after participating in India’s Republic Day celebration.
Video

Video Obama Urges Closer Economic Ties During Historic India Visit

U.S. President Barack Obama says the United States and India must do better to capitalize on untapped potential in their economic relationship - by removing some of the roadblocks to greater trade and investment. As VOA correspondent Aru Pande reports from New Delhi, Obama spoke after participating in India’s Republic Day celebration.
Video

Video US, EU Threaten New Russia Sanctions Over Ukraine

U.S. President Barack Obama has blamed Russia for an attack by Ukrainian separatists that left dozens dead in the port of Mariupol and cast further doubt on the viability of last year’s cease-fire with the Kyiv government. VOA’s Michael Bowman reports from Washington.
Video

Video White House Grapples With Yemen Counterterrorism Strategy

Reports say the U.S. has carried out a drone strike on suspected militants in Yemen, the first after President Barack Obama offered reassurances the U.S. is continuing its counterterrorism operations in the country. The future of those operations has been in question following the collapse last week of Yemen’s government. VOA White House correspondent Luis Ramirez reports.
Video

Video Kerry Warns Against Violence in Nigeria Election

US Secretary of State John Kerry visited Nigeria Sunday in a show of the level of concern within the U.S. and the international community over next month’s presidential election. Chris Stein reports.
Video

Video Zoo Animals Show Their Artistic Sides

The pursuit of happiness is so important, America's founding fathers put it in the Declaration of Independence. Any zookeeper will tell you animals need enrichment, just like humans do. So painting, and even music, are part of the Smithsonian National Zoo's program to keep the animals happy. VOA’s June Soh met some animal artists at the zoo in Washington. Faith Lapidus narrates.
Video

Video Worldwide Photo Workshops Empower Youth

Last September, 20 young adults from South Sudan took part in a National Geographic Photo Camp. They are among hundreds of students from around the world who have learned how to use a camera to tell the stories of the people in their communities through the powerful medium of photography. Three camp participants talked about their experiences recently on a visit to Washington. VOA’s Julie Taboh reports.
Video

Video Saudi, Yemen Developments Are Sudden Complications for Obama

The death of Saudi Arabia's King Abdullah and the collapse of Yemen’s government have cast further uncertainty on U.S. efforts to fight militants in the Middle East and also contain Iran’s influence in the region. VOA White House correspondent Luis Ramirez reports on the new complications facing the Obama administration and its Middle East policy.
Video

Video Progress, Some Areas of Disagreement in Cuba Talks

U.S. and Cuban officials are reporting progress from initial talks in Havana on re-establishing diplomatic ties. U.S. Assistant Secretary of State (for Western Hemisphere Affairs) Roberta Jacobson said while there was agreement on a broad range of issues, there also are some “profound disagreements” between Washington and Havana. VOA State Department correspondent Pam Dockins has the story.
Video

Video US, Japan Offer Lessons as Eurozone Launches Huge Stimulus

The Euro currency has fallen sharply after the European Central Bank announced a bigger-than-expected $67 billion-a-month quantitative easing program Thursday - commonly seen as a form of printing new money. Henry Ridgwell reports for VOA from London on whether the move might rescue the eurozone economy -- and what lessons have been learned from similar programs around the world.
Video

Video Nigerian Elections Pose Concern of Potential Conflict in 'Middle Belt'

Nigeria’s north-central state of Kaduna has long been the site of fighting between Muslims and Christians as well as between people of different ethnic groups. As the February elections approach, community and religious leaders are making plans they hope will keep the streets calm after results are announced. Chris Stein reports from the state capital, Kaduna.
Video

Video As Viewership Drops, Obama Puts His Message on YouTube

Ratings reports show President Obama’s State of the Union address this week drew the lowest number of viewers for this annual speech in 15 years. White House officials anticipated this, and the president has decided to take a non-traditional approach to getting his message out. VOA White House correspondent Luis Ramirez reports.
Video

Video S. Korean Businesses Want to End Trade Restrictions With North

Business leaders in South Korea are calling for President Park Geun-hye to ease trade restrictions with North Korea that were put in place in 2010 after the sinking of a South Korean warship.Pro-business groups argue that expanding trade and investment is not only good for business, it is also good for long-term regional peace and security. VOA’s Brian Padden reports.

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More

All About America

AppleAndroid