UKRAINIAN ECONOMIC AND FINANCIAL DEVELOPMENTS
FOR THE WEEK ENDING JANUARY 21.
27 JANUARY 2000
SOURCE: US EMBASSY KIEV
-------
SUMMARY
-------
1. THIS CABLE SUMMARIZES UKRAINIAN ECONOMIC AND
FINANCIAL DEVELOPMENTS WRITTEN ABOUT IN THE PRESS
DURING THE WEEK ENDING JANUARY 21. THE PRESIDENT
APPOINTED THREE DEPUTY ECONOMIC MINISTERS. THE IMF
MISSION DEPARTED WITHOUT RECOMMENDING A RESUMPTION OF
EFF DISBURSEMENT TO UKRAINE. THE GOU BEGAN CONTACTING
FOREIGN BOND HOLDERS ABOUT DEBT RESTRUCTURING. SOME
CURRENCY RESTRICTIONS WERE LIFTED. PARLIAMENT
APPROVED VOLODYMYR STELMAKH AS NBU GOVERNOR, BUT THE
VOTE MAY BE CHALLENGED. THE NBU STATED IT WOULD NOT
CONDUCT MONETARY POLICY TO SUPPORT THE EXCHANGE RATE.
PARLIAMENT AMENDED LAND COST INDEXING PROCEDURES. END
SUMMARY.
--------------------------------------------
RESIDENT APPOINTS DEPUTY ECONOMIC MINISTERS
-------------------------------------------
2. PRESIDENT KUCHMA RE-APPOINTED VIKTOR KALNYK AS
FIRST DEPUTY ECONOMICS MINISTER AND BOTH IHOR SHUMYLO
AND ANDRIY HONCHARUK (FORMER MINISTER OF FOREIGN
ECONOMIC RELATIONS AND TRADE) AS DEPUTY ECONOMICS
MINISTERS, THE PRESIDENTIAL PRESS SERVICE REPORTED.
-----------------------------------------------------
IMF MISSION POSTPONES DECISION TO RENEW DISBURSEMENTS
-----------------------------------------------------
3. WHILE VISITING KIEV JANUARY 11-22, INTERNATIONAL
MONETARY FUND (IMF) MISSION HEAD MOHAMMED SHADMAN-
VALAVI SAID THAT HE WOULD NOT RECOMMEND THE IMF BOARD
OF DIRECTORS RENEW DISBURSEMENTS TO UKRAINE UNDER ITS
EXTENDED FUNDING FACILITY (EFF) PROGRAM THIS MONTH.
THE IMF SUSPENDED THE PROGRAM IN SEPTEMBER BECAUSE THE
GOU FAILED TO IMPLEMENT REQUIRED REFORMS.
4. ACCORDING TO SHADMAN-VALAVI, THE VISITING IMF
MISSION APPROVED THE GOU'S REFORM PROGRAM AND FOREIGN
DEBT REPAYMENT PLANS, BUT WOULD NOT CONSIDER RENEWING
CREDIT TO UKRAINE UNDER ITS USD 2.2 BILLION EFF
PROGRAM UNTIL AFTER PARLIAMENT RATIFIED THE 2000 STATE
BUDGET. ACCORDING TO PRIME MINISTER YUSHCHENKO, THE
GOU NOW EXPECTED TO SUBMIT A CORRECTED DRAFT 2000
BUDGET TO PARLIAMENT IN EARLY FEBRUARY.
5. LAST YEAR, UKRAINE REPAID MORE TO THE IMF THAN IT
RECEIVED. UKRAINE REPAID LOANS WORTH USD 558.5
MILLION, PLUS AN ADDITIONAL USD 109 MILLION IN
INTEREST. UKRAINE RECEIVED LOANS WORTH USD 446.6
MILLION IN 1999.
--------------------------------
GOU NEGOTIATES DEBT RESCHEDULING
--------------------------------
6. THE GOU DID NOT MAKE PAYMENTS ON USD 18 MILLION
WORTH OF BONDS MATURING ON JANUARY 20, ACCORDING TO
INTERFAX-UKRAINE. THE BONDS, WHICH WERE ISSUED BY
CHASE MANHATTAN BANK LUXEMBOURG S.A., WERE ORIGINALLY
RESCHEDULED 18 MONTHS AGO. ACCORDING TO PRIME
MINISTER YUSHCHENKO, THE GOU WAS CONDUCTING
NEGOTIATIONS AND WOULD AVOID DEFAULT. ACCORDING TO
ING BARINGS, THE INVESTMENT BANK CHOSEN BY THE GOU TO
MANAGE THE RESCHEDULING OF UKRAINE'S FOREIGN DEBT, THE
FINANCE MINISTRY COMPLETED PREPARATIONS FOR AN
EXCHANGE OFFER ON UKRAINE'S FOREIGN COMMERCIAL DEBT
COMMITMENTS AND WILL MAKE THE OFFER TO ITS CREDITORS
FORMALLY IN EARLY FEBRUARY. THE GOU PLANNED TO
RESCHEDULE BONDS WORTH USD 1.9 BILLION MATURING IN
2000 AND 2001, ACCORDING TO AN ING BARINGS' PRESS
RELEASE.
-----------------------------------------
SOME FOREIGN EXCHANGE RESTRICTIONS LIFTED
-----------------------------------------
7. ON JANUARY 20, AN NBU RESOLUTION ALLOWING BANKS TO
ISSUE FOREIGN CURRENCY LOANS TO UKRAINIAN COMPANIES
CAME INTO EFFECT. THE RESOLUTION ALSO LIFTED THE BAN
ON THE PURCHASE OF FOREIGN CURRENCY AT THE DOMESTIC
MARKET TO REPAY FOREIGN CURRENCY LOANS.
8. ANOTHER NBU RESOLUTION, SCHEDULED TO COME INTO
EFFECT JANUARY 28, WILL ALLOW COMPANIES WITH FOREIGN
CAPITAL THAT WERE CREATED BETWEEN 1992-1996, TO CHOOSE
WHAT TO DO WITH THEIR FOREIGN CURRENCY REVENUES.
THESE JOINT VENTURES WERE PREVIOUSLY OBLIGED TO SELL
THEIR FOREIGN CURRENCY REVENUES AT THE INTERBANK
MARKET. A SIMILAR PROVISION HAD BEEN INCLUDED IN THE
LAW "ON FOREIGN INVESTMENT," WHICH IS NO LONGER IN
EFFECT. THE RESOLUTION ALSO ALLOWED OTHER ECONOMIC
ENTITIES (I.E., UKRAINIAN COMPANIES, OR FOREIGN
COMPANIES REGISTERED LATER THAN 1996) TO ASK THE NBU
THAT THE REQUIREMENT TO SELL FOREIGN CURRENCY REVENUES
BE WAIVED ON AN INDIVIDUAL BASIS. THE TWO MEASURES
WERE INTENDED TO LIBERALIZE CURRENCY REGULATIONS AND
ENCOURAGE BANKS TO LEND TO COMPANIES.
--------------------------------------------------
RADA MAJORITY APPROVES STELMAKH AS AN NBU GOVERNOR
--------------------------------------------------
9. ON JANUARY 21, 239 PARLIAMENTARIANS APPROVED
VOLODYMYR STELMAKH'S APPOINTMENT TO THE POSITION OF
NBU GOVERNOR. ALTHOUGH A MAJORITY OF PARLIAMENTARIANS
APPROVED THE APPOINTMENT, THE VOTE MAY BE CHALLENGED
BECAUSE OF PARLIAMENT'S SPLIT INTO RIVAL ASSEMBLIES
AND THE REFUSAL OF PARLIAMENT SPEAKER TKACHENKO TO
SIGN THE DECISION.
-----------------------------------------
HREBENYK: NBU NOT TO LIMIT HRYVNIA SUPPLY
-----------------------------------------
10. THE NBU WILL NO LONGER MANIPULATE THE HRYVNIA
MONEY SUPPLY TO MAINTAIN EXCHANGE RATE STABILITY, NBU
MONETARY DEPARTMENT HEAD HREBENYK ANNOUNCED JANUARY
20. SHE SAID THAT THE MONETARY SITUATION HAD CHANGED
SINCE THE END OF 1999, WHEN EXPANSION OF THE MONEY
SUPPLY RESULTING FROM LARGE SOCIAL PAYMENTS MADE PRIOR
TO THE PRESIDENTIAL ELECTIONS WEAKENED THE HRYVNIA'S
STABILITY. HREBENYK CHARACTERIZED THE CURRENT MARKET
SITUATION AS "NORMAL" AND SAID THAT THE MONETARY
SUPPLY LEVEL WAS "WELL REGULATED." HREBENYK
IDENTIFIED INTEREST RATE REDUCTION AND INCREASED BANK
LENDING AS PRIORITIES OF THE CURRENT NBU POLICY.
----------------------------------------
PARLIAMENT INTRODUCES LAND COST INDEXING
----------------------------------------
11. ON DECEMBER 22, PARLIAMENT AMENDED THE LAND FEE
PAYMENT LAW TO INTRODUCE A PROCESS BY WHICH LAND
VALUES CAN BE ADJUSTED. EVERY YEAR ON JANUARY 1, A
COEFFICIENT DETERMINED BY THE CABINET OF MINISTERS
WILL BE USED TO REASSESS LAND VALUE. BECAUSE LAND
ASSESSMENTS WERE NOT PREVIOUSLY INDEXED, DEVALUATION
DECREASED THE AMOUNT OF FEES THAT WERE COLLECTED BASED
ON LAND VALUE. LAND VALUES ARE USED TO CALCULATE LAND
RENT, FEES FOR REGISTRATION OF LAND RENT CONTRACTS,
AND FOR LAND PRICE DETERMINATION FOR SELLING PURPOSES.
--------------
EXCHANGE RATES
--------------
12. HRYVNIA/DOLLAR EXCHANGE RATES WERE AS FOLLOWS:
01/17 01/18 01/19 01/20 01/21
-----------------------------------
OFFICIAL RATE 5.4253 5.4604 5.5191 5.5253 5.5227
INTERBANK RATE 5.5800 5.5843 5.5756 5.5463 5.5271
KIEV CASH RATE 5.6205 5.6365 5.6538 5.6594 5.6545
MOSCOW CASH RATE 5.6880 5.6480 5.6500 5.6420 5.6520
----------------------------
UICEX PRECIOUS METAL TRADING
----------------------------
13. TRADING IN PRECIOUS METALS AT THE UICEX FOR THE
WEEK WAS AS FOLLOWS:
SILVER UAH 47.89 PER ONE TROY OUNCE
GOLD UAH 1913.89 PER ONE TROY OUNCE
PLATINUM UAH 2480.23 PER ONE TROY OUNCE
PALLADIUM UAH 2057.27 PER ONE TROY OUNCE
------------------
MAIN STOCK INDICES
------------------
14. RESULTS OF UKRAINE'S MAIN STOCK INDICES FOR THE
WEEK WERE AS FOLLOWS (AS OF JANUARY 20):
WEEKLY CHANGE, PCT
INDEX POINTS IN UAH IN USD
----- ------ ------ ------
WOOD-15 1160 8.43 5.22
PFTS 43.14 4.10 N/A
15. KEY INTEREST RATES FOR THE WEEK WERE AS FOLLOWS
(AS OF JANUARY 20, 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
-------------- ----------- -------------
ONE-DAY 23.6 10.9
SEVEN-DAY 34.5 2.4
14-DAY 45.0 -1.6
30-DAY 59.5 -6.7
60-DAY 55.0 -22.5
90-DAY 55.0 -25.0