UKRAINIAN ECONOMIC AND FINANCIAL DEVELOPMENTS
FOR THE WEEK ENDING JANUARY 14.
20 JANUARY 2000
SOURCE: US EMBASSY KIEV
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SUMMARY
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1. THIS CABLE SUMMARIZES UKRAINIAN ECONOMIC AND
FINANCIAL DEVELOPMENTS WRITTEN ABOUT IN THE PRESS
DURING THE WEEK ENDING JANUARY 14. PARLIAMENT
POSTPONED THE SECOND READING OF THE 2000 BUDGET LAW.
DURING 1999, THE OFFICIAL EXCHANGE RATE CHANGED BY
52.2 PERCENT, THE MONETARY BASE INCREASED BY 39
PERCENT, AND THE MONEY SUPPLY INCREASED BY MORE THAN
40 PERCENT. REAL GDP DECREASED BY LESS THAN ONE-HALF
PERCENT IN 1999. THE NBU SOLD THREE MILLION DOLLARS
ON THE FOREIGN CURRENCY MARKET. PRESIDENT KUCHMA ASKED
THAT PARLIAMENT APPOINT STELMAKH AS NBU GOVERNOR. THE
NBU CLARIFIED ITS CURRENCY POLICY. AVERAGE FLOUR
PRICES ROSE 16-20 PERCENT SINCE DECEMBER. END
SUMMARY.
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PARLIAMENT POSTPONED SECOND READING OF 2000 BUDGET LAW
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2. PARLIAMENT POSTPONED ITS SECOND READING OF THE 2000
BUDGET LAW -- PREVIOUSLY SCHEDULED FOR JANUARY 13 --
UNTIL FEBRUARY 1. BECAUSE PARLIAMENT CANNOT REJECT
THE BUDGET OUTRIGHT AT THIS POINT, THE DEPUTIES
REFUSED TO CONSIDER THE DRAFT SUBMITTED BY THE
GOVERNMENT JANUARY 6 AND SENT IT BACK FOR IMPROVEMENT.
PARLIAMENTARIANS WERE REPORTEDLY ANGRY THAT THE SECOND
DRAFT DIFFERED CONSIDERABLY FROM THE DRAFT TO WHICH
THEY HAD GIVEN A FIRST READING (THE NEW DRAFT WAS
REPORTEDLY MUCH TOUGHER). IN PARTICULAR, THE
GOVERNMENT'S DRAFT SUGGESTED A DISTRIBUTION OF FUNDS
BETWEEN LOCAL AND CENTRAL BUDGETS OF 27-75 PERCENT,
COMPARED WITH 41-59 PERCENT DISTRIBUTION SUGGESTED BY
PARLIAMENT.
3. ON JANUARY 14, PARLIAMENT WAS ONE VOTE SHORT OF
OVERRIDING THE PRESIDENT'S VETO OF THE EMERGENCY
BUDGET LAW THAT WOULD HAVE PROVIDED FUNDING UNTIL THE
2000 BUDGET WAS ADOPTED. THE PRESIDENT HAD RETURNED
THE LEGISLATION TO PARLIAMENT WITH HIS SUGGESTION THAT
IT DELETE THE PROVISION PROHIBITING BUDGET MONEY FROM
BEING USED TO HOLD A REFERENDUM UNTIL AFTER PARLIAMENT
ADOPTED THE 2000 BUDGET.
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1999 MACROECONOMIC INDICES
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BUDGET IMPLEMENTATION
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4. ACCORDING TO FINANCE MINISTER MITYUKOV, TOTAL
REVENUES COLLECTED BY THE STATE BUDGET LAST YEAR
TOTALED UAH 18.8 BILLION -- UAH 4.7 BILLION OR ABOUT
20 PERCENT SHORT OF ITS TARGET FIGURE. LOCAL BUDGETS
RECEIVED UAH 12.6 BILLION -- UAH 1.9 BILLION OR 17
PERCENT MORE THAN WAS PLANNED FOR 1999. ACCORDING TO
A STATE TAX ADMINISTRATION REPORT, TAX BODIES
COLLECTED UAH 25.9 BILLION FOR THE CONSOLIDATED (LOCAL
AND STATE) BUDGET (102.6 PERCENT OF THE TARGET FOR THE
YEAR), INCLUDING UAH 14.5 BILLION FOR THE STATE BUDGET
ALONE (94.8 PERCENT OF THE TARGET).
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MONETARY INDICES
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5. IN DECEMBER, THE MONETARY BASE INCREASED BY UAH 320
MILLION OR 2.7 PERCENT TO TOTAL ABOUT UAH 11.98
BILLION. DURING THE SAME PERIOD, THE MONEY SUPPLY
INCREASED BY ABOUT UAH 1.03 BILLION OR 4.9 PERCENT TO
TOTAL UAH 22.07 BILLION. DURING 1999, THE MONETARY
BASE INCREASED BY UAH 3.37 BILLION OR 39.2 PERCENT AND
THE MONEY SUPPLY GREW BY UAH 6.36 BILLION OR 40.5
PERCENT. THE OFFICIAL HRYVNIA/DOLLAR EXCHANGE RATE
CHANGED BY 52.2 PERCENT DURING 1999. INFLATION IN
1999 WAS ONLY SLIGHTLY MORE THAN 19 PERCENT,
INDICATING THAT MUCH OF THE MONETARY GROWTH WAS
CHANNELED INTO THE FOREIGN EXCHANGE MARKET.
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1999 REAL GDP DECREASED BY LESS THAN ONE-HALF PERCENT
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6. ACCORDING TO PRELIMINARY ESTIMATES BY THE STATE
STATISTICS COMMITTEE, REAL GDP IN 1999 AMOUNTED TO
99.6 PERCENT OF ITS 1998 FIGURE. LAST YEAR, GDP
DECREASED BY 0.4 PERCENT, THE BEST RESULT SINCE
INDEPENDENCE. GDP DECREASED BY 1.7 PERCENT IN 1998,
BY 3.2 PERCENT IN 1997 AND BY 10 PERCENT IN 1996.
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NBU SELLS THREE MILLION DOLLARS ON CURRENCY MARKET
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7. FOR THE FIRST TIME IN TEN MONTHS, THE NATIONAL BANK
OF UKRAINE (NBU) ON JANUARY 10 SOLD U.S. DOLLARS ON
THE INTERBANK FOREIGN CURRENCY MARKET. THE NBU SOLD
MORE THAN THREE MILLION DOLLARS, SERHI YAREMENKO, THE
DIRECTOR OF THE NBU'S FOREIGN CURRENCY DEPARTMENT
ANNOUNCED. YAREMENKO SAID THAT THE BANK DOES NOT PLAN
TO SUPPORT THE HRYVNIA RATE WITH ADDITIONAL SALES.
LAST YEAR, THE NBU PURCHASED FOREIGN CURRENCY WORTH
USD 700 MILLION. THE BANK HELD USD 1.051 BILLION IN
FOREIGN CURRENCY RESERVES AS OF THE LAST WEEK OF
DECEMBER.
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PARLIAMENT TO VOTE ON APPOINTMENT OF NBU GOVERNOR
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8. ON JANUARY 13, PRESIDENT KUCHMA OFFICIALLY PROPOSED
THAT PARLIAMENT APPOINT VOLODYMYR STELMAKH TO THE POST
OF NBU GOVERNOR. THE VOTE ON HIS APPOINTMENT WAS
SCHEDULED FOR JANUARY 20. AFTER FORMER NBU GOVERNOR
YUSHCHENKO TOOK THE POST OF THE PRIME MINISTER ON
DECEMBER 22, STELMAKH PERFORMED THE DUTIES OF ACTING
NBU GOVERNOR. STELMAKH PARTICIPATED IN THE NBU BOARD
SINCE 1993, AND WAS IN CHARGE OF MONETARY POLICY,
CURRENCY REGULATION AND CONTROL.
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CURRENCY POLICY TO BE SET BASED ON THE 2000 BUDGET
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9. ON JANUARY 14, NBU PRESS SECRETARY RICKBERG REFUTED
RECENT PRESS REPORTS THAT THE NBU HAD INTRODUCED A
FLOATING EXCHANGE RATE. RICKBERG SAID THAT THE
FOREIGN CURRENCY POLICY FOR THE CURRENT YEAR WOULD BE
ANNOUNCED ONLY AFTER THE ADOPTION OF THE 2000 STATE
BUDGET. THE GOVERNMENT HAD NOT YET INVALIDATED THE
CURRENCY BAND OF UAH 3.4 - 4.6 PER ONE USD SET IN
FEBRUARY 1999, AND SURPASSED IN NOVEMBER. THE NBU HAS
MAINTAINED THE FOREIGN CURRENCY BAND POLICY SINCE
1997.
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AVERAGE FLOUR PRICES UP 16-20 PERCENT SINCE DECEMBER
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10. ACCORDING TO MEDIA REPORTS, FLOUR PRICES INCREASED
AN AVERAGE OF 16-20 PERCENT ACROSS THE COUNTRY IN
DECEMBER AND JANUARY. PRICES FOR BAKERY PRODUCTS
INCREASED BY 10-15 PERCENT IN ODESSA, 20-40 PERCENT IN
KHARKIV AND 40-50 PERCENT IN LVIV OBLASTS SINCE THE
NEW CROP. AG EXPERTS ATTRIBUTED THE PROBLEM TO
UNEQUAL DISTRIBUTION OF GRAIN STOCKS, WORSENED BY GOU
REGULATION OF BREAD PRICES AND BAKERIES' PROFIT
MARGINS. PRICES WERE EXPECTED TO STABILIZE IN
FEBRUARY, HOWEVER, WHEN FARMERS STARTED SELLING GRAIN
TO PURCHASE AGRICULTURAL INPUTS.
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EXCHANGE RATES
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11. HRYVNIA/DOLLAR EXCHANGE RATES WERE AS FOLLOWS:
01/09 01/10 01/11 01/12 01/13
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OFFICIAL RATE 5.21945.2194 5.2431 5.3504 5.3600
INTERBANK RATE HOLIDAY5.5360 5.5375 5.4471 5.4389
KIEV CASH RATE 5.5333 5.3336 5.5603 5.5948 5.5836
MOSCOW CASH RATE -- 5.5580 5.6420 5.5700 --
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MAIN STOCK INDICES
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12. RESULTS OF UKRAINE'S MAIN STOCK INDICES FOR THE
WEEK WERE AS FOLLOWS (AS OF JANUARY 13):
WEEKLY CHANGE, PCT
INDEX POINTS IN UAH IN USD
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WOOD-15 1070 7.66 5.93
PFTS 40.71 7.38 N/A
13. KEY INTEREST RATES FOR THE WEEK WERE AS FOLLOWS
(AS OF JANUARY 1
3, 1999):
NBU DISCOUNT RATE: 45 PCT (SINCE 24 MAY 1999)
NBU LOMBARD RATE: 50 PCT (SINCE 24 MAY 1999)
KIEV INTERBANK AVG. ANNUAL CHANGE FROM
RATES PCT LAST WEEK,PCT
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ONE-DAY 12.7 -130.8
SEVEN-DAY 32.2 -94.1
14-DAY 46.6 -73.4
30-DAY 66.2 -41.3
60-DAY 77.5 -32.5
90-DAY 80.0 -30.0