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Old 1st May 2014, 17:24
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Ukraine - Economics

The Revolution in Banking
March 27, 2014 ▪ Lyubomyr Shavalyuk
With the new administration of Ukraine’s National Bank in place, Ukrainian banks appear to be waking up from lethargic sleep. Countless financial repressions imposed by the Viktor Yanukovych regime are gone, and the banking system is free to develop and grow

There was good reason why the appointment of Stepan Kubiv as Governor of Ukraine’s National Bank (NBU) was one the first things the new government did. The hryvnia seemed to have gone into free fall, and a bank run nearly sent the country’s banking system crashing. Against this background, the first steps Kubiv took in the new office seemed totally wrong. To announce the meagre volume of the state’s gold and hard currency reserves at the height of a hard currency rush and to issue UAH 2.8bn of direct refinancing – money that could go to the currency exchange market – on the first day looked like pure madness. But less than a month later, the situation has completely calmed down. The banking system has started long-term reforms needed for its strategic recovery. The several weeks that Kubiv has been at the helm of the National Bank have brought about a revolution in the banking sector, enabling financial institutions to develop, just like the EuroMaidan has empowered ordinary Ukrainians.

Success was secured through just a handful of the right steps. First, the National Bank switched to the floating currency exchange rate. By letting the hryvnia loose, the central bank refused to lie à la the previous government that there were “no economic preconditions for a significant devaluation of the hryvnia”. Instead, the National Bank started transparent and truthful dialogue with banks by holding two broad meetings with bankers within a week and promising to organize similar discussions on a regular basis. On Kubiv’s initiative and in an unprecedented move, free access to the NBU has been granted to all bank presidents, which will improve reaction time to challenges faced by the system. It became clear that the first measures taken by the new NBU governor, which initially did not seem to make any sense, are nothing else but an expression of transparency declared by the central bank. After being harassed by the old government for several years, bankers highly appreciated the new policy. They adopted a constructive stance, and though joint efforts the hard currency panic was overcome within days.

What followed was a pinpoint strike that hit at the root of the problem. The NBU set a limit of an equivalent of UAH 15,000 on withdrawals in hard currency and, in case of early withdrawals, permitted banks to pay out the money in hryvnias (at the exchange rate set by the bank on the day of withdrawal). This measure revealed a deep understanding of the situation.

The thing is that the bank rush was caused by rich and very rich Ukrainians. It so happened that under the Yanukovych regime, the majority of rich people joined the Party of Regions or drew close to it. It could not have been otherwise – it was their survival instinct at work. Later, after establishing contact, many businessmen began to participate in illegal schemes covered up by the government and redistribute money thus obtained. Again, it could not have been otherwise, because it was unreal to honestly increase one’s capital under Yanukovych – one could only honestly lose it. Therefore, when the EuroMaidan kicked off, it turned out that the majority of rich Ukrainians were linked to the Party of Regions and the regime. This is precisely the reason there were no major withdrawals in December, January and the first part of February while Yanukovych was in power. As soon as he was ousted, the pyramid crumbled and many people with millions on their accounts decided to run, fearing punishment for involvement in the regime’s illegal schemes. Initially, they tried to make money transfers abroad, but as foreign countries began to block dubious transfers, they decided to take cash. The banking system was losing billions of hryvnias from deposits every day, but not because of ordinary people. (According to Prime Minister Arseniy Yatseniuk, 85% of depositors have up to UAH 20,000 on deposit.)

The limit placed on daily withdrawals had virtually no effect on ordinary Ukrainians but squarely hit the frightened schemers of the old regime who caused the high demand on the hard currency market in the first place. Moreover, by permitting banks to pay this money in hryvnias, Kubiv made sure, with almost complete certainty, that it would stay in Ukraine. Amidst a hard currency panic, banks purchase limited amounts of foreign currency in cash to be sold to the population. This is done to avoid large losses if the exchange rate goes in the opposite direction. Thus, wealthy Ukrainians were unable to purchase foreign currency through cash departments, because they simply did not have it in sufficient quantities. No-one will take hryvnias abroad in briefcases, because it can only be used as waste paper there. The NBU made a truly brilliant move with a happy combination of efficiency and no side effects.
The Revolution in Banking - Economics - The Ukrainian Week
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Old 1st May 2014, 17:44
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Tycoon Wars: Elusive Hope
March 6, 2014 ▪ Yuriy Radchenko
Economic changes should be deep. Otherwise there will be no change

As to oligarchs, they always switched to a new government only after they were sure that the old one was facing a defeat. They did so when Viktor Yushchenko replaced Leonid Kuchma, and when Yushchenko lost the election to Viktor Yanukovych. This time, the first signal came from the Dnipropetrovsk-based oligarch Ihor Kolomoyskyi who publicly warned Kharkiv Mayor Hennadiy Kernes to stop fueling separatism.
Tycoon Wars: Elusive Hope - Economics - The Ukrainian Week
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Old 2nd May 2014, 12:52
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IMF approves USD 17bln bailout for Ukraine 01/05/2014 | 09:11 AM World News

WASHINGTON, May 1 (KUNA) -- The International Monetary Fund (IMF) has announced the approval of a USD 17 million aid package for Ukraine in hopes of helping the country recovery its continuing crisis.
In a statement, the IMF said late Wednesday that the authorities' economic program supported by the Fund aims to restore macroeconomic stability, strengthen economic governance and transparency, and launch sound and sustainable economic growth, while protecting the most vulnerable.
This approval allows immediate disbursement of about USD 3.19 billion. The second and third disbursements will be, "based on bi-monthly reviews and performance criteria." The IMF Managing Director and Chair Christine Lagarde said, "deep-seated vulnerabilities, together with political shocks, have led to a major crisis in Ukraine. The economy is in recession, fiscal balances have deteriorated, and the financial sector is under significant stress." According to Lagarde, this aid package is expected to maintain an exchange rate to restore competition, stabilize the Ukrainian financial system, reduce the fiscal deficit, eliminate loss in the energy sector and help the country move away from its past problematic governmental practices.
Lagarde added, "the authorities are determined to stabilize the financial system, maintain confidence in banks, and strengthen balance sheets and financial regulation and supervision." She affirmed, "a strong and comprehensive structural reform package is critical to reduce corruption, improve the business climate, and achieve high and sustainable growth. The authorities have already enacted a new public procurement law, reducing room for misuse of public resources." The IMF noted that there are risks to the program in the case of further escalations from Russia the "unrest in the east of the country" that "pose a substantial risk to the economic outlook." (end) ak.sd
KUNA : IMF approves USD 17bln bailout for Ukraine - Economics - 01/05/2014
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Old 2nd May 2014, 14:49
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Ukraine bailout of $17bn approved by IMF who warns reforms are at risk
Kiev agrees to a sweeping economic programme but may need to extend bailout if the unrest in east of country escalates
Angela Monaghan theguardian.com, Thursday 1 May 2014 15.07 EDT

Ukraine is at risk of a prolonged recession and may need an extension of its $17bn bailout should tensions with Russia and unrest in the east of the country escalate, the International Monetary Fund (IMF) has warned.

The IMF approved the emergency funding package after Kiev agreed to a sweeping economic reform programme designed to reduce the deficit and promote greater financial stability.

The Washington-based fund expects Ukraine's troubled economy to shrink by 5% in 2014 amid weak investor and consumer confidence, before partially rebounding in 2015 with 2% growth.

However, the IMF conceded there were significant risks to the outlook, not least because of the strong trade and gas ties between Ukraine and Russia.
Ukraine bailout of $17bn approved by IMF who warns reforms are at risk | World news | theguardian.com
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Old 5th May 2014, 03:41
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Turmoil in Ukraine
Kiev Struggles to Break Russia’s Grip on Gas Flow
By ANDREW HIGGINS 9:14 PM ET
CHASLOVTSY, Ukraine — As Ukraine tries to contain a pro-Russian insurgency convulsing its eastern region, a perhaps more significant struggle for the country hinges on what happens beneath the ground here in a placid woodland in the far west, on the border with Slovakia.

This is where about $20 billion worth of Russian natural gas flows each year through huge underground pipelines to enter Europe after a nearly 3,000-mile journey from Siberia. It is also, the pro-European government in Kiev believes, where Ukraine has a chance to finally break free from the grip of Gazprom, Russia’s state-controlled energy behemoth.

In an effort to do this, Ukraine has for more than a year been pushing hard to start so-called reverse-flow deliveries of gas from Europe via Slovakia to Ukraine, thus blunting repeated Russian threats to turn off the gas tap.

An agreement signed last week between Slovak and Ukrainian pipeline operators opened the way for modest reverse-flow deliveries of gas from Europe, where prices are much lower than those demanded by Gazprom for its direct sales to Ukraine.

But the deal, brokered by the European Union and nudged along by the White House, fell so far short of what Ukraine had been lobbying for that it left a nagging question: Why has it been so difficult to prod tiny Slovakia, a European Union member, to get a technically simple and, for Ukraine and for the credibility of the 28-nation bloc, vitally important venture off the ground?

Some cite legal and technical obstacles, others politics and fear of crossing the Kremlin, but all agree that a major obstacle has been the power and reach of Gazprom, which serves as a potent tool for advancing Russia’s economic and geopolitical interests, and is ultimately beholden to President Vladimir V. Putin.
http://www.nytimes.com/2014/05/05/wo...ref=world&_r=0
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Old 14th May 2014, 22:03
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Ukraine Seeks to Raise $1 Billion Through Sale of U.S.-Backed Bonds
Bond Deal Will Give Country Access To Global Debt Markets At Cheap Rates

By Ben Edwards & Alexander Kolyandr May 14, 2014 7:40 a.m. ET
Cash-strapped Ukraine is set to gain some much-needed financial support from the U.S. with a bond deal that will allow the country to borrow in global debt markets at ultracheap rates.

Ukraine's government said on its website Wednesday that it is setting out plans to raise $1 billion from a sale of five-year bonds that will be backed by the U.S.

The maximum yield will be 2.9%, the government said. By contrast, Ukraine's existing bonds maturing in six years are yielding about 11%, according to Tradeweb. Five-year U.S. Treasurys yield 1.593%, meaning that Ukraine's U.S.-backed bonds will be cheaper for investors to buy for essentially the same risk. Bond yields move in the opposite direction to prices. Separately the European Union Wednesday also raised 100 million euros ($137 million) from selling bonds, proceeds of which will be lent to Ukraine.

The funds will help Ukraine meet pressing bill payments, such as the cost of natural gas imports from Russia.

The cost of borrowing has been prohibitively expensive for Ukraine since November last year, when the country's then President Viktor Yanukovych backed out of a trade pact with the EU to seek closer ties with Russia, unleashing a barrage of civil unrest that led to Mr. Yanukovych being forced out of office and heightening tensions between Russia and the West.

U.S. Treasury Secretary Jacob Lew last month signed a $1 billion loan agreement allowing Ukraine to issue debt that the U.S. will honor should Ukraine be unable to pay it back.
Ukraine Seeks to Raise $1 Billion Through Sale of U.S.-Backed Bonds - WSJ.com
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Old 15th May 2014, 03:19
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Ukraine Gas Producer Appoints R. Hunter Biden to Board
By Javier E. David

Ukraine's largest private gas producer announced on Tuesday that it added R. Hunter Biden — the son of U.S. Vice President Joseph Biden — to its board of directors.

In a statement on its website, Burisma Holdings said the younger Biden will be in charge of the company's legal unit, while providing support "among international organizations."

The release quoted Hunter Biden as saying that "my assistance in consulting the Company on matters of transparency, corporate governance and responsibility, international expansion and other priorities will contribute to the economy and benefit the people of Ukraine."
Ukraine Gas Producer Appoints R. Hunter Biden to Board - NBC News
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