UKRAINE’S central bank has sharply raised interest rates from 19.5% to 30% in an effort to curb inflation and prop up its beleaguered currency by further depressing the economy.
The rate hike comes as the government in Kiev is seeking a $17.5bn (£11.4bn) ‘assistance programme’ from the International Monetary Fund (IMF).
Inflation is expected to reach at least 26% this year and the Ukrainian hryvnia has tumbled against the US dollar.
The currency has lost 80% of its price since last April, when the Kiev regime attacked the anti-nationalist and anti-fascist workers in the eastern People’s Republics of Donetsk and Lugansk.
This was just one month after the landslide referendum in the Crimea – in the wake of the February coup in Kiev – which decided to unite with Russia.
Last week, the hryvnia hit a record low of 33.75 to the dollar before recovering some ground, while the Ukraine economy is forecast to shrink by 5.5% in 2015.
On Monday night, the Ukrainian parliament approved a package of austerity measures that were a precondition for receiving the benefits of an IMF ‘rescue package’. The austerity measures included cutting pensions by 15%!
The legislature agreed bills that include budget, customs and tax code amendments that will worsen life for all Ukrainians in the west of the country.
These are the measures the government committed itself to pass during talks with a mission from the Washington-based IMF lender in Kiev last month.
The IMF’s executive board will meet on March 11th, when it will make its decision. If it says ‘yes’, the first tranche of some $5bn will become available within days, with the rest of the $17.5bn of bailout money to try to stave off complete state bankruptcy to follow.
If it says ‘no’ then a further massive bout of belt tightening will have to be imposed by the Kiev parliament.
Ukraine wants the IMF aid to be ‘front-loaded’, that is to receive about 60 per cent of the cash – or more than $10 billion – this year, according to Finance Minister Natalie Jaresko.
At the same time, Ukraine’s benchmark government debt, due in 2017, is trading at 43 cents on the dollar, according to data compiled by Bloomberg.
Ukraine’s four-year loan programme is now awaiting approval by the IMF’s executive board, to agree disbursement of aid, which Kiev hopes will open the way for $22.5 billion in additional financing from other institutions and countries.
Meanwhile, the hryvnia’s plunge prompted the Ukrainian central bank to tighten capital controls last week as its reserves declined to $6.42 billion.
However, the Ukrainian government’s proposed budget amendments envisage widening the fiscal gap by $476 million to make space for a spending increase of about 35 billion hryvnia to pay subsidies pledged to households.
This is urgently needed to ease the impact on the poorest Ukrainians of higher gas tariffs – demanded by the IMF – in order to stave off a popular revolt.
However, the real situation is that while the official inflation figure is 28.5 per cent, annual price growth has now reached 272 per cent, with a monthly rate of 64.5 per cent!
Public feeling and anger is now increasing on an hourly basis. The Western drive that produced the February 24th 2014 coup to annex the Ukraine to the EU has brought nothing but disaster to the workers and farmers of Ukraine both west and east.
Ukraine has no future as a satellite of the EU. Its national economy is being smashed, with western companies taking over its most profitable sectors and shutting down the rest.
The only way forward for Ukraine is through the working class in the east and west uniting and taking joint action to bring down the Kiev puppet regime, to restore a Soviet Ukraine, with its industries and land under the ownership and control of the working class.
This will mean bringing down the Kiev regime. However, more and more workers are ready for this task.
They recognise that the propaganda of a better life for all under the heel of Brussels was a sick joke played on them by gangsters!
