Cabinet dismissal under discussion

UKRAINE - In Brief 02 Mar 2015 by Dmytro Boyarchuk

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After new wave of hryvnia decline the Cabinet of Yetsenyuk is under attack. Budget deficit and hryvnia printing for budget needs were named as the key reasons for hryvnia plunging below 30 hryvnia per $1. On Feb 28 I was invited for a meeting with prime-minister and minister of economy. Near 10 experts were present at the discussion. It was for the first time in my practice high official invited experts to listen what they are saying not to tell them how cool he is. Arseniy Yatsenyuk spent near 40 min (!) listening to different ideas and he was very attentive. Though it is very good that prime-minister is ready to listen to proposals, unfortunately, it looks like this move was driven by his desperate position. And, unfortunately, he does not accept necessity of more radical budget cuts. Indeed as Minfin informed on Feb 27 state collections fell 11.7% in Jan 2015 and deficit just in one month reached UAH 9.2 billion which is near 1/3 of monthly spending (UAH 31.6 billion). To large extent that poor result was due to delayed direct wire from the Central bank (so called ‘profit’ of the National bank). In Jan 2014 the Central bank wired UAH 4 billion of its ‘profits’ to the budget while in Jan 2015 it was zero. Still net of the Central bank ‘profit’ effect state collections increased by modest 5.1% against the backdrop of 28.5% y/y consumer inflation through the month. No doubt, in light of such poor performance at the year start the outlined by the Cabinet target of 37% state collections growth for 2015 looks overoptimistic. New wave of hryvnia decline will make consumption falling even deeper (-23.6% organized retail trade in Jan). So potential dismissal of Yatseniuk is ...