Starry Aspirant

European Parliament approves emergency financial assistance ( for the EIU) In mid-February, the European Parliament voted to extend to Ukraine an emergency EU loan worth Euro1.2bn. This clears the way for the swift disbursement of half the sum, following the earlier approval of the loan by the European Council, as long as the political and economic reform conditions attached to the funding are judged to have been met, which is likely. The purpose of the loan in to help to cover Ukraine’s external financing gap, thereby supporting financial and economic stability in the country, undermined in recent months by the impact of geo-political tensions with Russia. Most recently, this showed itself as the withdrawal of coverage of Ukraine by some international commercial insurers, affecting airlines and shipping, and forcing the government to set up a new HRN16bn (US$592m) insurance fund of its own.  Although the level of public debt in Ukraine has come down substantially since 2015—to 54%...

Reserves fall, amid strong downward pressure on the hryvnya (for the EIU) Ukraine’s international reserves came to US$29.29bn at the end of January, down by US$1.65bn on a month earlier, according to the National Bank of Ukraine (NBU, the central bank). Correspondingly, reserve coverage of imports fell to 3.6 months, from 4.1 months at the end of 2021. The level of reserves held by the NBU is an indicator of the authorities’ capacity to meet their debt commitments and to protect the financial system from destabilisation—in particular, to smooth out sharp movements of the hyrvnya exchange rate to the US dollar. In 2021, Ukraine’s international reserves rose by US$1.8bn, or 5%, to US$30.94bn. The NBU was able to achieve this owing to a mix of favourable price and demand trends for key Ukrainian exports, alongside continuation of loan inflows, including from the IMF and the European Commission (EC). Since December, however, the NBU’s net currency purchases have turned negative, quite shar...

Investment recovered weakly in 2021, while the outlook remain subdued amid heightened geo-political tensions (for the EIU) The volume of capital investment in Ukraine grew by 9.7% year on year in the first three quarters of 2021, according to latest data from the State Statistical Service.  Against the backdrop of a year-on-year fall in investment by almost a quarter in 2020, as the pandemic and official responses to it hit economies worldwide, the pace of investment recovery looks weak. Nonetheless, according to a survey of almost 1,500 industrial firms by the Ukrainian statistics agency in October 2021, business expectations for production, sales prices, employment and capacity usage in the fourth quarter of last year remained on a broad upward trend. Meanwhile, construction growth, as an indicator of firms’ confidence in realising a return on investment, slowed relatively abruptly in final months of 2021, against a strengthening base a year earlier. Towards the end of January th...

The course I propose provides an overview of the modern Ukrainian oligarchy as the country’s dominant post-communist political economy institution. Starting from an outline of how the institution was formed from a developing relation between political elites and regional business networks in the 1990s, students will examine what the oligarchy is, how it operates, and how it has managed to reproduce itself across crises, despite the country’s perennially poor economic performance. The course is comprised of 3 lectures and seminars which introduce political economy and a subject, focusing on a comparison between neo-classical and institutional economics. It is followed by 7 lectures/ seminars on key empirical themes concerning the modern Ukrainian oligarchy, based on a book-length monograph of my PhD dissertation, The Ukrainian Oligarchy After the Euromaidan , as well as key readings on the political economy of modern Ukraine on which it draws. It will, however, include more of an extern...

(for the EIU) In mid-January Petro Poroshenko returned to Ukraine to face possible arrest on a charge of treason. In the event, however, a Kyiv court postponed its decision on whether to place him in pre-trial detention. The former president is accused of funding a terrorist organisation, owing to his role in helping to organise the purchase of coal from separatist-held areas of the Donbas at the height of the armed conflict there in 2014-15. This is just one of a series of actions taken against Poroshenko, and other established figures within the Ukrainian elite, by the authorities under the current president, Volodymyr Zelenskyi, most recently under the rubric of “de-oligarchisation”.  Though soundly beaten by Zelenskyi in the presidential campaign of 2019, Poroshenko ran on a more “nationalist” platform, with a slogan of “Army, language, faith”. This aimed to draw on his success in containing the spread of Russia’s “Novorossiya” military project to parts of Donetsk and Luhansk r...

(for the EIU) The cost of borrowing from abroad rose for the Ukrainian government in December 2021, according to the National Bank of Ukraine (NBU, the central bank). Ukrainian sovereign Eurobonds are reported as trading at yields of around 9.5% across maturities.  This reflects recent developments in global economic policy and geo-politics. The key policy announcement is that of the US Federal reserve, which has said i t says it intends to wind up its long-running monetary stimulus programme more quickly than planned, and could bring forward monetary tightening,  in response to rising inflationary pressures. This has lifted borrowing rates even for countries considered to be relatively risk free. At the same time, the risk premium for lending to Ukraine has gone up in line with threats from Russian leaders of a return to large-scale military action against the country, unless their wider security concerns are addressed, by the US government in particular. These developments b...

The president's “de-oligarchisation” drive addresses issues vital for Ukraine’s development, but is unlikely to produce lasting change (December 2021, for the EIU) The president’s claim that a Russian-linked coup is being organised against him may be part of a wider domestic political struggle set off by his “de-oligarchisation” drive.  De-oligarchisation addresses the key developmental issue facing Ukraine. This is that, by restricting political and economic competition, the collusive, behind-the-scenes politics of Ukrainian elites has acted as a fetter on economic growth, helping to explain the country’s low living standards. Concerns have been raised that the policy could be applied selectively to damage the president’s political rivals.  The measures may be too limited to produce lasting change. Moreover, Zelenskyi appears to lack both the resources and the durable domestic political alliances that would be required to affect a long-term transformation of national governan...

Second SBA loan instalment will ease concerns on government’s financing position (for the EIU)   On November 22nd the IMF board signed off on a first review of Ukraine’s economic performance under a stand-by arrangement (SBA) agreed in mid-2020, releasing to the government an additional US$700m loan instalment, and taking the total disbursement under the US$5bn facility to US$2.8bn. The date for programme completion was extended by six months to the middle of 2022.  Volodymyr Zelenskyi, the Ukrainian president, welcomed the news and said that the additional funds would be used to support the stability of the financial sector and to tackle the ongoing Covid health emergency. Alongside the central aim of reconciling public finances with debt sustainability goals, SBA loan conditions tie further disbursements to progress on reforms, to ensure the independence of the National Bank of Ukraine (NBU, the central bank), to improve governance of the banking sector, and to reform the ju...

Cost-push inflation could undercut the domestic recovery (for the EIU) In September, the average nominal monthly wage rose to HRN14,239 (about US$535), according to the State Statistical Service, up by one-fifth on a year earlier. In the same month, the pace of real wage growth slowed to 6.8% year on year. In 2021, rapid real wage growth has been a key factor driving the domestic recovery from last year’s steep economic contraction, when Ukraine’s real GDP fell by 4%, driven by the impact of the Covid pandemic. However, the pace of growth of the real wage has been slowing since May, with the fortunes of the domestic retail sector following in step. By September, retail turnover, for example, had slowed modestly, to a cumulative 12.2% compared with the first nine months of 2020, from around 14% at the end of the first half. While some labour market developments are likely constrain the recovery of household spending—including a rise in the unemployment rate, and in the stock of unpaid w...