05 February 2015

The State of Ukraine - Time to 'Draw the Curtains'

The situation gets worse each day.
Today, we see the Hryvnia (UAH) decline to 22 against the USD, and that is the official bank rate as per the NBU. The black market rate will be approaching 30 to $1. But dollars and euros are just not available to buy in Ukraine anyhow.
Inflation will soon be reaching over 30%. Bank lending rates have been increased today to 19.5 %
The country has only $6.5 billion in foreign currency reserves.
(As I was writing this the Head of the National Bank of Ukraine Valeriy Gontareva has just announced the rate will now be 25 to the $1)

Many people thought something would change today, when US Secretary of State John Kerry visited Ukraine. Although the US will provide much needed financial assistance, they will not provide any military support. Plus the latest news is that German Chancellor Merkel and French President Hollande have also refused to provide any military support.

So what is the future for Ukraine?

The IMF will no doubt provide financial support. So the future for Ukraine would appear to be a country heavily dependent on international loans and aid.
The international/multi-national companies already in the country may well continue to try and survive. Plus a whole range of NGO’s, quasi autonomous foreign funded organisations and the like will continue to provide employment to a few. Many local businesses have already gone out of business and the media in Ukraine are not reporting the true situation in the economy. (They are not reporting anywhere near enough about what is really going on). Far too many businesses and entrepreneurs do not have any money to pay taxes.

The lucky winners are those individuals and businesses who receive income in the form of foreign currency. Those with contracts for IT support and software development will be OK. Ukrainians and Foreigners who have agreed to be paid in USD or EURO will be laughing all the way to the bank. But inflation will catch up with everyone.

The majority of the people in Ukraine are suffering badly. Wages are in short supply if payable at all. Many are already in survival mode and concentrate on providing food for their families on a daily basis.

The economy has only days before it collapses if the IMF does not provide funding next week.
Therefore, I cannot see the situation improving for many years. Although I have a business in Ukraine, together with private property, the time has come for me personally to ‘bring down the curtain’.

This decision was not taken quickly or easily.

Ukrainians are very good people. The great majority are honest and hardworking and reliable. They deserve better. They deserve to be part of Europe.  They cannot understand why we from the ‘west’ have failed them. Why have we not provided them with military support against an aggressive Russian Federation under the control of Vladimir Putin.  Moreover, the great problem of corruption still hangs like a millstone around everyone’s neck in Ukraine.

Ukrainians are talented people. They are highly skilled in many professions.  During the early part of 2014 they set an example to the rest of Europe when they decided to overthrow a corrupt President and his corrupt government.  Unfortunately this proved unacceptable to Vladimir Putin and as we all know led to the invasion and annexation of Crimea and the continuing invasion into Eastern Ukraine.

I sincerely hope and pray that one day in the not too distant future the people of Ukraine can live in a peaceful and calm civilised society aligned to true Western European values.

Gerald Bowers

5 February 2015

No comments: