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  • Central Bank Slashes Prime Rate Again
  • Gov’t Says Economic Recovery Starts This Summer
  • For Sale: Dnipro Hotel
  • Flights to Turkey Start July 1, Flights to EU Later
  • 50 Million Ukrainian Trips to EU In 3-years of Visa-Free

To kickstart Ukraine’s economic recovery, the central bank cut the prime rate by an unexpected 2 percentage points, to 6%, the lowest level since Ukraine won independence from the Soviet Union in 1991. It was the ninth straight cut in 14 months, a series that started in April of last year when the prime rate was 18%. Effective today, the new rate is below the 7% target rate the National Bank of Ukraine had set for the end of this year.

Following a 2-point cut in late April, the bank clearly moved in reaction to the severe second quarter downturn triggered by the national lockdown to combat coronavirus. “With high probability, consumer and investment demand will remain depressed longer than predicted,” said Yakiv Smoliy, central bank governor. “The fall of the Ukrainian economy may be deeper than expected… decisive enough steps are needed to quickly return the economy to growth.”

The interest rate cut comes as the IMF gives a bearish view on Ukraine’s economy, predicting an 8.2% drop this year and full recovery only by 2024. Output isn’t expected to reach its pre-crisis levels until 2023–24,” the IMF said in a lengthy report accompanying IMF Board approval of a $5 billion, 18-month Stand-By Arrangement with Ukraine. “Reforms increasingly faced resistance from vested interests, and court rulings undermined reform progress, especially in tackling corruption and financial-sector reforms…As a result, investment, and notably foreign direct investment, continued to be held back by a difficult business environment, and growth was too low to noticeably close the income gap with Ukraine’s peers.”

The IMF deal comes with conditions: retaining foreign exchange rate flexibility, linking household gas prices to regional prices after August, passing legislation to establish the ultimate beneficiary owners of land, and keeping to this year’s inflation target of 5%. Last month, prices were up 1.7% yoy.

The government expects Ukraine’s economic rebound to start next month. All these macro-forecasts roughly coincide: starting from the third quarter, we expect economic growth in Ukraine,” Prime Minister Shmyhal told reporters yesterday. “There are businesses that have suffered, but there are also businesses and manufacturers who are quite optimistic.” Promising an increase in government purchases and maintenance of the $4 billion road construction program, he said: “Warming up the economy is one of the main tasks of the government for the current year.”

Big” privatizations, over $10 million, will be only a handful this year, the Prime Minister predicts. However, he says 300 small and medium state companies will be sold this year. Dmytro Sennychenko, head of the State Property Fund, tells the European Business Association that 1,000 state-owned enterprises are to be sold in coming years, and another 1,178 will be liquidated.

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Next month, Kyiv’s iconic Dnipro Hotel will be put up for auction, Sennychenko says. The state-owned hotel on European Square has 186 rooms, restaurants and several conference halls. The starting auction price is $10 million.

Ukrposhta plans to sell its Stalin-era landmark headquarters on Khreschatyk Street, Kyiv’s main street. Igor Smelyansky, CEO of the state postal company, believes the building would sell for $37 million. Modernizing the building would cost $3.5 million, he says in a TV interview. Ukrposhta plans to sell the main sorting center near the Kyiv central railway station, and with the proceeds to build a new sorting center outside of Kyiv. Two weeks ago, Ukrposhta held seven auctions on Prozorro.Sales, selling non-core real estate for a total of $3.4 million.

Turkey opens to tourists from Ukraine July 1, Ilker Adıgüzel, general director of Anex Tour, said citing a telephone agreement between the foreign ministers of the two Black Sea nations. On July 1, Anex Tour resumes daily direct charter flights to Antaly and Bodrum, operated by Azur Air Ukraine. He said that Turkey has “implemented all the necessary safety measures for tourists and tourism in general.”

The EU plans a gradual opening of its external borders starting July 1, giving priority to countries with coronavirus infection rates lower than the EU’s, Interfax-Ukraine says, citing Ylva Johansson, a European Commissioner for Home Affairs. “From July 1, we will begin to gradually open borders with some countries,” she said. Referring to travel inside the EU, she added: “We are proposing countries to remove restrictions on internal borders from Monday.”

This policy forces postponement of all Kyiv-Boryspil-EU flights scheduled for June: KLM to Amsterdam on Monday, Austrian Airlines to Vienna on June 22, and Czech Airlines to Prague on June 22. Ryanair is selling tickets from Ukraine to 18 EU cities, starting July 1. Ryanair flies from Kyiv Boryspil, Kharkiv, Lviv and Odesa.

In the three years since the visa-free regime started, on June 11, 2017, Ukrainians have made almost 50 million trips to the EU, reports Ukraine’s State Border Service. With the explosion in discount air links, air became the most popular form of travel. Travel to the EU grew by 6.5% yoy, to 18.65 million. During the first two months of this year, travel was up 30%, to 3 million. Last year, nearly 1 million Ukrainians traveled to the EU by rail, with Ukrzaliznytsia maintaining 20 trains into the EU.

Ukrainian workers and students are waiting 7-9 nine hours to cross the only pedestrian crossing into Poland, at the Medyka crossing, 80 km west of Lviv city, Radio Free Europe reports from the crossing. With up to 3,000 people walking across the border daily, many say they lost their jobs due to the coronavirus lockdown. Increasing numbers are from central and eastern Ukraine, RFE reports.

Poland will have the lowest economic drop in the EU due to coronavirus this year, Poland’s Prime Minister Mateusz Morawiecki, predicts to TV Wschod. Morawiecki, an economist, said: “Data from the European Commission and the EBRD show that Poland will suffer the least in Europe and will have the least drop in GDP from all EU countries, including the United Kingdom, Norway and Switzerland.” In May, Poland’s unemployment rate increased by 0.2% to 6%. The Prime Minister said he hopes Poland’s contraction this year will not be worse than 4.5%. In 2008-2009, Poland was the only major economy in Europe that did not contract.

During the height of the lockdown the number of trucks crossing the Lviv region section of the Poland-Ukraine border dropped by one quarter, Edita Khabowska, spokeswoman for the Polish Customs Service in Podkarpackie Voivodeship, tells Ukrinform. Between March 15 and May 15, the number of trucks fell to 42,000.

Lockdown Freight Flows: Rail Containers up, River Cargo down. During the first five months of this year, Ukrzalynistia carried 16% more containers than during January-May last year. Trains moved 185,000 containers, reports Magistral, the state railroad’s inhouse news site. During the same period, river freight was down 14% yoy, to 2.7 million tons, reports the River Information Service, a unit of the Ukrainian Sea Ports Authority. Last year, the river carried 11.8 million tons of freight, up 19% over 2018.

During the first 10 days of speed cameras on Kyiv’s streets and highways, the number daily violators has dropped in half. Speeders paid 7,399 fines, bringing $54,000 to the Treasury, reports Internal Affairs Minister Arsen Avakov.

Kyiv-Uzhgorod, once Ukraine’s longest domestic flight from the capital, may resume after a Slovakia-Ukraine agreement is signed next month, Infrastructure Minister Vladyslav Krykliy writes on Telegram. Due to the airport’s location on Slovakia’s eastern border, all takeoff and landings have to be coordinated with Slovakia, an EU member state. Two years ago, Uzhgorod airport was certified by European Union Aviation Safety Agency.

  • Gov’t Cuts Deal with Solar, Wind Power Producers
  • For Ukraine: Checks in the Mail Total $3 billion
  • Central Bank Averted Big Devaluation, Run on Banks During Corona-Crisis
  • Freedom Holding Buys into Ukrainian Exchange

Wind power tariffs would be cut by 7.5%, solar tariffs by 15% under a draft memorandum of understanding approved Wednesday by the Cabinet of Ministers and two industry groups. ‘Green’ tariffs would apply to solar plants completed by July 1 and to wind power plants now under construction. Green tariffs would end at the end of this decade. At the cabinet meeting, acting Energy Minister Olha Buslavets implied the state will pay the $500 million debt run up this spring to green power producers.

The proposed deal comes as about 600 green power producers face defaulting on bank loans or bankruptcy, industry leaders said at a press conference Tuesday. Two industry groups signed the deal: European-Ukrainian Energy Agency and the Ukrainian Wind Energy Association. The third, the Ukrainian Association of Renewable Energy is expected to sign as well. It is unclear if the Rada can pass enabling legislation before it takes its summer break in early July.

The compromise comes after nine months of talks that have left many investment projects frozen and investors angry. Ihor Tinniy, a co-founder of the Ukrainian Renewable Energy Association, said Tuesday that a 15 % tariff cut would mean a 50% cut in profits. He calculates such rate cuts would deprive Ukraine of €250-300 million in annual taxes. Alina Sviderska, government relations manager for Norway’s Scatec Solar, says green tariffs are higher in Ukraine than in the EU because of the high cost of borrowing for Ukraine projects and of connecting to the power grid.

Many investors – foreign and domestic – are talking with law firms about litigation – either through international arbitration or through bilateral investment treaties. “We cannot exclude final conditions will be adverse to investors to such extent so they will be forced to initiate individual or collective (mass) claims via investment arbitration,” Maksym Sysoiev, a lawyer the Kyiv office of Dentons, emailed green energy companies yesterday. “We created our database of investors interested in potential claims against Ukraine.”

The tariff cuts would save Ukraine €200 million a year, and €2 billion by 2030, Prime Minister Shmygal said. He assured the Cabinet: “Today we are in the final stage of signing an agreement with investors in green energy.”  The road to the deal included months of mediation by the EU’s Energy Community Secretariat in Vienna.

“Ukraine’s Green Energy Disaster is Sliding Toward a Power Crisis,” headlines a pre-deal story in BNE Intellinews. The article notes high tariffs drew $4.5 billion in investment into renewables since 2018, the only significant investment in Ukraine’s power generation since the Soviet era. “It is pretty much the only sector of the economy that has attracted broad-based foreign investment inflows,” writes Ben Aris, the author. Noting that President Zelenskiy has declined to meet with green power investors, he concludes: “Zelenskiy recently introduced an ‘investment nanny’ program to help ease inbound investors through the traps and tricks of investing in Ukraine, but pointedly the government is ignoring the needs and problems of the few serious foreign investors it already has.”

“The market is clearly moving in the direction of clean power,” Michael Bloomberg writes in the lead editorial of Bloomberg Green magazine about world trends. The cost of clean energy has dropped dramatically, which has made wind and solar power two of the fastest-growing job-creating industries. They’re now cheaper than fossil fuels in much of the world—and producing better returns for investors…Business leaders and consumers see value in a greener economy. After all, it saves them money on their power bills, cleans the air in their communities, and reduces the volatility of energy markets.”

With Ukraine’s IMF deal in place, the money is tumbling in. The EU wired €500 million, the second tranche under a macro financial assistance program. The Finance Ministry is to receive $2.1 billion, the first tranche of a total of $5 billion to be extended to Ukraine over 18 months. Within two weeks, the World Bank is to wire $250 million, Finance Minister Sergei Marchenko told reporters yesterday. President Zelenskiy summarized to reporters: “We expect more than $3 billion in the coming month.”

These inflows mean “Ukraine can feel quite safe regarding the country’s external financial needs for the remainder of this year,” Anders Åslund, the Swedish-American economist, writes in an Atlantic Council Ukraine Alert blog. “Under these circumstances, Ukraine’s Ministry of Finance would be well advised to take the opportunity to sell a substantial Eurobond to render the state’s finances even more secure as soon as possible while the going is good.”

Parsing the IMF statement, which three times calls for retaining the independence of the National Bank of Ukraine, Åslund writes: “The IMF could just as well have written: Do not dare touch the NBU!” Noting IMF concern over Zelenskiy’s future economic policies, he writes: “Reading between the lines, the message to the Ukrainian government is clear: you may have fulfilled our conditions, but we still do not trust you.”

Thanks to the skill of the central bank, the March currency crisis broke with tradition and did not create a big devaluation and a run on the banks, Olena Bilan, Dragon Capital’s chief economist, told a financial conference. “During the crisis, the dynamics of the exchange rate surprised positively,” she said, noting that many predicted the government lockdown during the coronavirus pandemic would cause the hryvnia to plummet below 30 to the dollar. She added: “For the first time in all crises we had almost no outflow of deposits from the banking system. It was very unexpected.” Noting that about 100 banks were closed during the 2014-2015 crisis, she said: “We now have a crisis of the real sector of the economy. But there is no crisis of the currency, banking, financial system. And this is to the great credit of the central bank.”

Kazakhstan-based Freedom Holding Corp. has bought a 20% equity stake in the Ukrainian Exchange, one of Ukraine’s two leading securities markets. With its shares traded on New York’s Nasdaq Capital Market, Freedom Holding is a financial services company strong in the former Soviet Union – Kazakhstan, Kyrgyzstan, Russia, Ukraine, and Uzbekistan. With 13 offices in Ukraine, Freedom is a licensed participant on the Exchange, located in Kyiv’s Horizon Office Tower. Freedom recently purchased a 13% interest in the St. Petersburg Stock Exchange.

  • IMF Approves $5 billion Stand-by Deal with Ukraine
  • Market Indicators Return to Pre-Crisis Levels
  • Inflation Drops to 1.7%
  • First China-Ukraine Container Trains Pulls into Kyiv

The IMF Board approved an 18-month, $5 billion Stand-by Arrangement with Ukraine. The first tranche of $2.1 billion should be transferred by this weekend. The rest will come in four installments through December 2021. The Board said in a statement that the conditionalities are “promoting a small set of key structural reforms to guarantee Ukraine’s return to growth after the crisis is over.” Keys are: preserving central bank independence and a free-floating exchange rate.

The world economic downturn sparked by coronavirus pandemic clearly prompted the IMF to act after nine months of talks with the Zelenskiy government. “Reform implementation has been uneven and steadfast implementation of structural reforms will be needed to create a more dynamic and competitive economy,” the IMF said. “At present, the humanitarian and economic crisis stemming from the COVID-19 pandemic, has refocused policy priorities away from deep structural reforms.”

The IMF gave a bearish forecast for Ukraine’s economic performance this year: GDP shrinkage of 8.2% in 2020 and growth of only 1.1% next year. By contrast, the World Bank forecast that Ukraine’s economic contraction will less than that in 2020 – 3.5%. For next year, the World Bank predicts that Ukraine’s economy will grow by 3%. Ukraine’s government predicts this year’s drop will be 5%.

“Uncertainty is large,” writes the IMF Board. “The economy is projected to contract sharply in 2020 as strict containment measures—in Ukraine and globally—led to sizable falls in domestic and external demand…The risks to the new program are very large. The uncertainty about the severity and length of the global downturn is exceptionally high. On the domestic side, uncertainty about the direction of economic policies remains substantial.”

As investors price in an IMF deal, Ukraine’s market indicators are returning to pre-corona crisis levels. The yield on Ukraine’s 12-year sovereign bond has fallen to 6.7%, the level of January. In late March, it spiked to near 12%. The price of GDP warrants fell to almost 50 in April. Now they are around 75, the level of last August. In the wider Emerging Market universe, Barclays USD High Yield EM Index, based on about 700 bonds, fell 23% in March. It has recovered 21.5% to near the level of December.

With the coronavirus lockdown depressing demand, inflation dropped in May to 1.7% yoy, down from 2.1% yoy in April, reports the State Statistics Service. Pulling down prices were these yoy drops: natural gas – 53.5%; gasoline – 28%; and vegetables – 21%. Pushing up prices were: fruit +35%; water + 25%; and education + 13.5%. The National Bank of Ukraine has set a year-end inflation target of 5%.

Kyiv has jumped 44 spots in a worldwide ranking of expatriate cost of living. In the Mercer index, Ukraine’s capital is now in 106th place, up from 150th place last year. Kyiv’s rise in the list of 209 cities seems to be largely due to the strengthening of the hryvnia in the second half of last year.

Capital investment in Ukraine fell during the first quarter by 35.5%, a reversal of 21% growth in the fourth quarter of last year, reports the State Statistics Service. For this January-March period, the hot spots were: services + 51%; telecom + 41%; and IT + 9%. About 75% of the $2.8 billion in investment was financed from company cash flows. Of the investment, 42% went for machinery and vehicles, and 49% for buildings.

The Finance Ministry cut yields on short term hryvnia debt at the weekly auction. The 3-month debt dropped from 9.9% per annum to 9%. The 6-month debt fell from 10.27% to 9.5%. The 9- and 12-month issues fell slightly, from 10.89% to 10.79-10.8%. For the first time since late February, just before the coronavirus crisis, the Ministry auctioned 18-month bonds, selling $215 million in equivalent with a yield of 10.8%.

After a two-month break, the Ministry sold bonds in euros, the press service reported on Facebook. Investors bought €353 million 11-month bonds, for a yield of 2.2%. In euros and hryvnia, the auction yielded the dollar equivalent of $664 million. One week earlier, the Ministry sold $108 million worth of hryvnia bonds.

The first China-Ukraine container train arrived Monday at Kyiv’s left bank freight terminal near Darnytsia. Carrying 41 containers, the train took 15 days to travel 9,000 km from northern China through Mongolia and then Russia to Ukraine. By ship, the same trip takes 45 days, Ukrzaliznytsia Infrastructure Director Roman Veprytsky writes on Facebook. The next container trains from China are to arrive June 16 and 26.

To date, 10 Chinese container trains have traveled through Ukraine to the EU, a lucrative business that Ukrzaliznytsia seeks to expand. Last month, China sent 1,033 container trains to Europe, 43% more than in May 2019. The number of containers totaled 93,000, up 48% yoy. With traffic backing up at the Belarus-Poland rail gauge break, Ukrzaliznytsia hopes to attract trains bound for Austria, Hungary and the Balkans. In January, a test Chinese train traveled from Lviv region 400 km into Poland on an old Soviet gauge line that runs to Sławków, a city in south-central Poland.

The Boryspil Express, Kyiv’s train to the plane, restarted Monday with direct links to Metro, bus, and Intercity trains at the newly rebuilt Vydubychi station. Referring to the Metro Green Line station, Ivan Yurik, acting CEO of Ukrzaliznytsia writes on Facebook: “We created the promised transport hub there. We combined several types of transport at once into a single logistic chain: rail, bus, air transport and the subway.”

With Kyiv Boryspil looking like Pyongyang International on a slow day, Ukraine’s largest airport handled 28,200 passengers in May, 98% below normal levels. In January and February, the airport handled 1,950,387 passengers 15% more than the first two months of last year. Two domestic routes re-started – to Odesa and Dnipro. On Monday, international flights re-started. The EU and the UK are largely closed to non-Schengen passport holders through the end of June.

Aivaras Abromavicius, director general of Ukroboronprom has fired Alexander Donets, president of Antonov. In his place, Alexander Losya, vice president for design, is to serve as interim head. Aviation analysts say that the best strategy for Antonov in the 2020s is to focus on producing cargo planes and regional commuter jets.

  • Green Energy Deadlock Heads Toward Litigation
  • Big Green Investments: Kherson Solar, Kernel Biomass and Black Sea Wind
  • Raiffeisen Moves Fintech Work from Vienna to Kyiv
  • Traffic Safety Campaign Targets Overloaded Trucks, Speeding Cars and Jaywalking Pedestrians

State losses due to lawsuits from green energy producers could hit $1 billion a year, predicts Oleg Gramotenko, General Director of Tesla Energy. “More than half of investors in renewable energy are already negotiating with international law firms regarding the preparation of lawsuits against the state of Ukraine,” he said at a press conference at Interfax-Ukraine. He said that nine months of talks over green tariffs have not resulted in a compromise.

The Guaranteed Buyer of electricity, known as GarPok, has fallen almost half a billion dollars behind in payments to green producers, says acting Minister of Energy Olga Buslavets. According to the GarPok website, the level of its settlements with renewable producers was: 11% in March; 5% in April; and 7% in May. According to Ukrenergo, the installed capacity of wind and solar plants in Ukraine now is 5.2 GW, about triple the level of 18 months ago.

Investment Collapse or Green Compromise?” was the topic of a press conference by eight leaders of the green industry in Ukraine. “Over the past nine months, Ukraine’s policy on the development of renewable energy has degraded from most favorable, completely unacceptable to attract investment,” charge organizers of the press conference at Kyiv’s Parkovy Convention Center. Noting that investors – foreign and domestic – invested $10 billion in Ukraine’s renewable industry, the organizers warn: “Now the state declares its intention to abandon its obligations and actually puts an end to the implementation of Ukraine’s green transition program to 2050.”

Kherson has doubled its wind and solar power since 2018 and now has the capacity the meet 40% of the electricity needs of region, reports hersonweek, a local news site. Located north of Crimea, with frontage on the Black and Azov Seas, Kherson has six wind power plants with 338 MW generating capacity and 50 solar plants with 401 MW capacity.

Kernel, Ukraine’s largest exporter of sunflower oil, is investing $170 million investment in electricity generating power stations powered by sunflower husks, the company reports on its Facebook page. By the end of next year, Kernel expects to have seven ‘green energy turbines’ generating a total of 90 MW. The largest, Starokostianstyniv oil crushing plant under construction in Khmelnytskyi region, will generate 20 MW to power the largest oilseed crushing plant in Ukraine.

Romania’s biggest power producer plans to build the Black Sea’s first offshore wind park, reports Balkan Green Energy News. Hidroelectrica SA, 80% owned by the Romanian state, plans to build by a €590 million, 500 MW wind park with turbines on towers anchored on the floor of the sea. Aiming for commissioning in 2026, Hidroelectrica expects to win funding for about half of the project cost from the European Commission, through its new European Green Deal program.

Raiffeisen Bank International has moved its digital banking work from Vienna to Kyiv to work with Edenlab, a boutique fintech software and product development company with about 70 employees. The Austrian bank’s unit at Edenlab will “a 100% RBI subsidiary,” a bank spokesman tells Vienna’s Der Standard news site. Noting that the bank has subsidiaries in 15 Eastern European countries, Der Standard speculates that the bank chose Ukraine because Andriy Stepanenko, RBI’s board member responsible for retail, is from Ukraine.

Ukraine’s main railway equipment manufacturer is challenging a tender that awarded a contract to China Railway Construction Corporation to build eight 5-coach subway trains for Kharkiv’s Metro. Noting that the Chinese winning bid was only 1% below the Ukrainian €49 million bid, Kriukiv Railway Car Building Works, of Kremenchuk, charges that Kharkiv Metro will have to pay an extra 25% for VAT and customs duties on imported equipment. They say the principal funder, the European Investment Bank, stipulates that national companies get preferences in the international tender. “At the plant, that they are surprised by the decision of the tender committee, since during the period of the economic crisis it would be more advisable to place orders with domestic enterprises,reports Kyiv’s Center for Transportation Strategies.

Canadian ‘Weigh-in-Motion’ laser sensors installed at six locations on highways around Kyiv found that 41% of trucks were overloaded, Ukravtodor reports. In a pilot project, six of the $1 million sensor complexes were installed last fall. Of the 1.15 million trucks measured in the six months, ending May 31, 470,342 trucks were overloaded. The state highways agency said: “This indicates that almost every second truck that travels along Ukrainian roads is dangerous for road users and destroys Ukrainian roads.”

Impressed by the numbers, the Cabinet of Minister allotted an extra $15 million to install 25 more ‘Weigh-in-Motion’ scale systems this year, and to repair 50 portable truck weighing scales. Last year, the World Bank contributed $4.9 million to help buy the first systems. Every new highway in the Big Construction project is to get a measuring system. Ukravtodor has published a map showing where sensors will be located, largely on roads leading to the Black Sea ports. Minister Krykliy said: “Due to violation of the rules for the passage of oversized and heavy vehicles, roads are being destroyed.”

Targeting road stretches with the highest records of fatalities, the Infrastructure Ministry plans install a total of 270 automatic speed cameras across Ukraine. The first 50 were turned in Kyiv one week ago. Sites in 12 other oblasts for 58 more cameras have been selected, Minister Krikliy writes on Facebook. In the first three days, the number of speeding violations recorded by the cameras in Kyiv dropped by 41%, from 57,880 to 34,176.

After cameras caught one Kyiv driver breaking the speed limit 14 times in 48 hours, Deputy Internal Affairs Minister Anton Gerashchenko said the government will submit to the Rada a bill to revoke the licenses of chronic speeders. He said: “There is no place on our roads for those who may kill people.”

Pedestrians will have to be more disciplined in crossing the street. The Rada approved on first reading a bill that increases the fine for jaywalking five-fold, to $10. Crossing a street at random while drunk will bring a $20 fine. Last year in Ukraine, vehicles killed 607 pedestrians and injured 8,005.

  • Corona Budget Raided for Roads
  • Ukraine is Big Organic Food Exporter to EU
  • Mice’ Eat 150,000 Tons of Grain
  • Watch Out Office Real Estate Investors: 1/3 of Workers Like Working at Home
  • Ze Drives Down Interest Rates
  • Exchange Rate, Reserves and Bank Branches Return to Pre-Corona Levels

The Rada voted to allow money from the $2.4 billion coronavirus fund to be used to pave roads. Arguing that the health crisis is now a social crisis, the government says the Big Construction road paving project will directly employ 13,000 people and provide work for 50,000 more. On April 13, the Rada voted to create the fund to fight coronavirus.

As of two weeks ago, only 20% of the coronavirus emergency money had been spent, reports the Kyiv School of Economics, drawing on Finance Ministry data. That leaves $1.9 billion for spending this summer. On Thursday, Alexander Kurbakov, head of Ukavtodor, the state highways agency, said the bill “will allow the state to direct funds from the COVID-19 special fund to roads, provided their non-use for other measures to counter the pandemic.”

Use of metallurgical slag and ash to replace crushed stone during road construction could save Ukraine up to $18 million each paving season, calculates Olga Boyko, leader of the European Business Association’s Ecology and Sustainable Development Committee. In the EU, up to 90% of slag and 43% of ash from steelmaking are used in road construction. Ukraine’s Cabinet of Ministers approved the use of this industrial waste and Donetsk region started using slag and ash on a road project the next month.

Ukraine was second only to China as the EU’s top source of organic food imports last year, according to a European Commission agro report for 2019. Ukraine supplied 10% of the EU’s 3.2 million tons of organic imports, compared to China’s 13%. Selling wheat, oilseeds, soybeans, fresh fruit and juices, Ukraine increased its organic exports to the EU by 27%. Ukraine’s overall food exports to the EU increased last year by 21%.

Opening the door for more Ukrainian food exports to China, Bloomberg reports there is ‘zero chance’ that China will fulfill its promise to buy $36.5 billion worth of American food this year. The USDA forecasts US food sales to China will hit $8 billion in September. Washington’s Peterson Institute calculates U.S exports to China of agricultural products run at 38% of the pace set in the February trade deal. Last year, China became Ukraine’s single largest trading partner, partly on the strength of Ukrainian food sales to China.

Mice are to blame for 150,000 tons of grain missing from Ukraine’s State Reserve, jokes Mykhailo Apostol, an adviser to the Minister of Internal Affairs of Ukraine. Mice, who “have names, job titles and must be brought to account in line with the law,” he clarifies in a BBC story. Entrepreneur Roman Grabezhov calculates it would take “almost a billion mice” to eat that much grain. The first phase of a national audit – a check of warehouses in five of Ukraine’s 24 oblasts – found 18,000 tons missing from one, 20,000 tons missing from another, and 112,000 tons missing from a third. BBC calculates that is $30 million worth of missing grain.

In an attitude shift that could impact office real estate, shopping and commuting patterns, 37% of respondents to a job agency survey would like to continue working from home after the quarantine is lifted. In the grc.ua survey, 48% of participants want the option to work at home until the coronavirus situation is completely under control, and 38% say companies should provide transport so workers do not take crowded minibuses or the Metro.

Almost half of Ukrainians think that their country is developing – and the other half believe it is stagnating, according to a survey conducted by Kyiv International Institute of Sociology. “Forty-seven percent of respondents believe that Ukraine is developing slowly and turning into a developed country,” Anton Hrushetsky, deputy director of the Institute, told reporters Friday. “At the same time, 46% chose the opposite view that Ukraine is stagnating and life is becoming increasingly unbearable.” In a telephone poll of 1,500 people taken in the last week of April, at the height of the lockdown, 49% said the nation’s top priority is to develop the economy, while 30% said the top priority is to win the war.

Looking ahead, 46% of adults polled say Ukraine should join the EU, and 42% say Ukraine should join NATO. By contrast, 13% say Ukraine should join the Moscow-led Eurasian Economic Union and 12% say Ukraine should join Moscow’s Collective Security Treaty Organization. If offered a foreign passport, 11% say they would move to the US or the EU. Only 6% said they would move to Russia. Offered a hypothetical moving ‘bonus’ of $100,000, the portion agreeing to move to Russia rose to 11%.

Tax registration of new entrepreneurs and new companies have returned to pre-coronavirus crisis levels, Prime Ministery Shmygal writes on his Facebook page. Noting the 5,000 entrepreneurs, or ‘FOPs’ and 1,000 new businesses registered, he writes: “The government’s anti-crisis measures are yielding the first results.” The Rada is reviewing a bill to create the “New Money” program which would give small businesses loans at 3% a year.

Last week, President Zelenskiy said “we will pressure lenders” so that borrowing rates will be “maximum 5-6%.”

Concorde Capital’s Alexander Paraschiy writes: Zelenskiy’s latest political stunt may feed his positive image and improve his popularity…[but] Zelenskiy’s professed goal of banks offering individual loans at 5-6% does not look feasible, given the central bank’s mid-term expectation of a key rate of 7% and its mid-term inflation target of 5%. As the government is borrowing today at 10%-11% in local currency, bank loans at 6% are possible only under state subsidies to the banks.”

With the purchase of $411 million on the interbank foreign exchange market last week the National Bank of Ukraine zeroed out the impact of its big sales in March to defend the hryvnia. Since the start of this year, the central bank has bought $347.5 million more than it sold. “By this way, this week we blocked the result of ‘black’ March and entered the plus for foreign exchange interventions,” the bank reported. Reserves are back to $25.4 billion.

Ukraine’s banks have opened 89% of their branches, up from 75% one month ago. The National Bank of Ukraine reports on its Facebook page: “Banks, along with the whole country, are gradually returning to normal life.”

About 100 flights a day flew in Ukraine’s airspace in May, down 89% year over year, reports UkSATSE, the national air traffic control agency. Monday, after a 3-month suspension, international flights re-started in and out of Ukraine. Friday 5th of June, domestic flights started from Kyiv Boryspil to Odesa and Dnipro. But UkSATSE reports: “Experts estimate that a return to the volume of pre-crisis flights can last up to two years.”

The original English version is from our partner UBN – Ukraine Business News. For more information and news archive, go to: www.ubn.news.

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