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

China May Be Biggest Winner From Ukraine Crisis

Missile sales, oil and gas shipments are among many areas that may drive Beijing and Moscow closer together in coming years More

Obama Faces Chaotic World, Limits of Power

Current foreign policy issues bring into focus challenges for US policymakers who are mindful of Americans' waning appetite for overseas military engagements More

SADC Meeting Lesotho Officials to Resolve Stalemate

Official says regional bloc has been engaged with leaders in Lesotho to resolve political disagreement that led to coup attempt 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.
West Africa Ebola Vaccine Trials Possible by Early 2015i
X
Carol Pearson
August 30, 2014 7:14 PM
A U.S. health agency is speeding up clinical trials of a possible vaccine against the deadly Ebola virus that so far has killed more than 1,500 people in West Africa. If successful, the next step would be a larger trial in countries where the outbreak is occurring. VOA's Carol Pearson has more.
Video

Video West Africa Ebola Vaccine Trials Possible by Early 2015

A U.S. health agency is speeding up clinical trials of a possible vaccine against the deadly Ebola virus that so far has killed more than 1,500 people in West Africa. If successful, the next step would be a larger trial in countries where the outbreak is occurring. VOA's Carol Pearson has more.
Video

Video Survivors Commemorate 70th Anniversary of Nazi Liquidation of Jewish Ghetto

When the German Nazi army occupied the Polish city of Lodz in 1939, it marked the beginning of a long nightmare for the Jewish community that once made up one third of the population. Roughly 200,000 people were forced into the Lodz Ghetto. Less than 7,000 survived. As VOA’s Kane Farabaugh reports, some survivors gathered at the Union League Club in Chicago on the 70th anniversary of the liquidation of the Lodz Ghetto to remember those who suffered at the hands of the Nazi regime.
Video

Video Cost to Raise Child in US Continues to Rise

The cost of raising a child in the United States continues to rise. In its latest annual report, the U.S. Department of Agriculture says middle income families with a child born in 2013 can expect to spend more than $240,000 before that child turns 18. And sending that child to college more than doubles that amount. VOA’s Deborah Block visited with a couple with one child in Alexandria, Virginia, to learn if the report reflects their lifestyle.
Video

Video Chaotic Afghan Vote Recount Threatens Nation’s Future

Afghanistan’s troubled presidential election continues to be rocked by turmoil as an audit of the ballots drags on. The U.N. says the recount will not be completed before September 10. Observers say repeated disputes and delays are threatening the orderly transfer of power and could have dangerous consequences. VOA correspondent Meredith Buel reports.
Video

Video Ukraine Battles Pro-Russia Rebel Assault

After NATO concluded an emergency meeting to discuss the crisis in eastern Ukraine, the country is struggling to contain heavy fighting near the strategic port of Mariupol, on the Azov Sea. Separatist rebels are trying to capture the city, allegedly with Russian military help, and Ukraine's defense forces are digging in. VOA's Daniel Schearf spoke with analysts about what lies ahead for Ukraine.
Video

Video Growing Business Offers Paint with a Twist of Wine

Two New Orleans area women started a small business seven years ago with one thing in mind: to help their neighbors relieve the stress of coping with a hurricane's aftermath. Today their business, which pairs painting and a little bit of wine, has become one of the fastest growing franchises across the U.S. VOA’s June Soh met the entrepreneurs at their newest franchise location in the Washington suburbs.
Video

Video Ebola Vaccine Trials To Begin Next Week

The National Institutes of Health says it is launching early stage trials of a vaccine to prevent the Ebola virus, which has infected or killed thousands of people across West Africa. The World Health Organization says Ebola could infect more than 20,000 people across the region by the time the outbreak is over. The epidemic has health experts and governments scrambling to prevent more people from becoming infected. Zlatica Hoke has more.
Video

Video Asian Bacteria Threatens Florida Orange Trees

Florida's citrus fruit industry is facing a serious threat from a bacteria carried by the Asian insect called psyllid. The widespread infestation again highlights the danger of transferring non-native species to American soil. VOA’s George Putic reports.
Video

Video Aging Will Reduce Economic Growth Worldwide in Coming Decades

The world is getting older, fast. And as more people retire each year, fewer working-age people will be there to replace them. Bond rating agency Moody’s says that will lead to a decline in household savings; reducing global investments - which in turn, will lead to slower economic growth around the world. But experts say it’s not too late to mitigate the economic impact of the world’s aging populations. Mil Arcega has more.
Video

Video Is West Doing Enough to Tackle Islamic State?

U.S. President Barack Obama has ruled out sending ground troops to Iraq to fight militants of the so-called Islamic State, or ISIS, despite officials in Washington describing the extremist group as the biggest threat the United States has faced in years. Henry Ridgwell reports from London on the growing uncertainty over whether the West’s response to ISIS will be enough to defeat the terrorist threat.
Video

Video Coalition to Fight Islamic State Could Reward Assad

The United States along with European and Mideast allies are considering a broader assault against Islamic State fighters who have spread from Syria into Iraq and risk further destabilizing an already troubled region. But as VOA State Department Correspondent Scott Stearns reports, confronting those militants could end up helping the embattled Syrian President Bashar al-Assad.
Video

Video Made in America Socks Get Toehold in Online Fashion Market

Three young entrepreneurs are hoping to revolutionize the high-end sock industry by introducing all-American creations of their own. And they’re doing most of it the old-fashioned way. VOA’s Julie Taboh recently caught up with them to learn what goes into making their one-of-a-kind socks.
Video

Video Americans, Ex-Pats Send Relief Supplies to West Africa

Health organizations from around the world are sending supplies and specialists to the West African countries that are dealing with the worst Ebola outbreak in history. On a smaller scale, ordinary Americans and African expatriates living in the United States are doing the same. VOA's Carol Pearson reports.

AppleAndroid