Prices under fire
To see the prospects of inflation, Ukrainians do not have at all to look into the pseudo-scientific and often contradictory comments of bureaucrats and experts. All they have to do is regularly visit a marketplace: any housewife will see prices rising without an apparent reason. For example, in Kyiv carrots cost as many as seven hryvnias a kilogram, Ukrainian-grown apples have jumped up to 8 hryvnias, and celery, Georgian and other tangerines and other citrus up to 12. Meat and dairy products are also rising in price.
The government has no option in these conditions but to try to convince the country in the effectiveness of the anti-inflation measures it is mapping out. Prime Minister Yulia Tymoshenko of Ukraine says she is absolutely sure that the cabinet will manage to stem the inflation tide in this country. “I think these anti-inflation measures will allow us to be reducing inflation month by month without hysterics, fuss or undue spin,” the premier claims. “The country can calm down: our government will curb the inflation we inherited from our predecessors,” she emphasized.
No doubt, this verbal attack on inflation proves that the premier is well aware of the existing danger. But it would be very good to hear her spell out the measures to be taken. Is it perhaps about suspending Saving Bank deposit compensations which we were told would not at all stir up inflation? Word has it that it is too late for slow depositors even to register.
Even the regional authorities are taking no anti-inflation measures: they think it wrong that the central government does not attract them to the mapping-out of these. Statements to this effect came from Viktor Bondar, Yurii Chyzhmar, and Viktor Marchuk, heads of the Dnipropetrovsk, Ternopil, and Rivne oblast administrations, respectively. Marchuk noted that, by not consulting with regional representatives, the government is acting “not very wise,” all the more so that many oblast administration heads have been holding their offices much longer than cabinet ministers. He believes this country needs “effective actions which would make it possible to explain to the people what is going on today and instill confidence in them that the process will be under control.” According to the Rivne oblast chief, weekly food price hikes “have no objective explanation.” He said that the regions “are prepared to curb speculative price jumps, but we are not prepared to reduce everything to purely administrative measures.”
Chyzhmar is worried that paying out Saving Bank arrears in Ternopil oblast is creating the danger of a deferred money supply to the consumer market. He said that the arrears are being paid out quite well in his oblast, but people are depositing a mere 0.5 percent.
According to the Dnipropetrovsk governor, “today, most of the regional administration heads have not heard of, let alone seen, this kind of document (governmental anti-inflation program — Ed.), they have not had even a chance to see one.” Moreover, Bondar complained that regional administration heads are in contact with the president alone because they have been again thrown out of the executive branch of power, while the cabinet keeps working on its own.
Discontent about cooperation with the government in quenching the inflationary “smoldering” (I hate to use the word “fire”) also runs through a comment by National Bank Board president Poroshenko. “Estimates show that if no changes are made, inflation will exceed 16 percent this year,” he says, commenting on the national Bank’s proposal to change this year’s inflation forecast from 9.6 to 12 percent. “This is what National Bank Governor Volodymyr Stelmakh put forward today during a tentative discussion as a coordinated position, a goal to be achieved by both the government and the National Bank,” the NBU Board president said. He thinks that inflationary processes can be checked, above all, by way of structural reforms in the economy and tough monetary measures.
Meanwhile, the International Monetary Fund is advising Ukraine to switch from a course-oriented to an inflation-oriented targeting, which experts believe will allow the National Bank of Ukraine to more effectively combat inflation and create better conditions for maintaining macroeconomic stability. What does it mean? It looks like our foreign advisors are fed up with the Ukrainian currency’s stability and launching an open attack on the dollar-pegged exchange rate, which they think essentially limits the NBU’s and the Ukrainian government’s resources in regulating the monetary market.
The question is in Ukraine’s attitude to this advice which is bound to result in revaluation of the hryvnia’s rate and in a still worse trade balance of this country. The above-mentioned Poroshenko believes, for example, that the exchange-rate policy (or, rather, the change of it — Author) will hardly be an effective inflation control tool.
