Ukraine Live Day 680: Inflation Rate Reached 44 Percent In 2015

Reuters reports that Valeriia Hontareva, Ukraine’s central bank governor, says that the official inflation rate in 2015 was 44 percent, a large rise from 2014’s 24.9 percent. Foreign reserves have been fairly stable, largely, as The Telegraph reports, due to an influx of IMF cash:

Ukraine is set to receive around $9bn in rescue cash in 2016, including $4.5bn from the International Monetary Fund, $1.5bn from the EU, and $1bn loan guarantee from the United States, which will be released in the first quarter of next year.

The economy has also lumbered under capital controls which limit the purchasing of foreign exchange in a bid to protect the collapsing value of the hryvnia.

Bail-out cash will also help boost Ukraine’s dwindling foreign exchange reserves, which have steadily grown over the last months to stand at $13.3bn in December.

The Telegraph also supplies this chart which clearly shows the correlation between the undeclared war with Russia and the inflation rate.

Ukraine’s central banker also predicted the IMF to move forward with its loans to Ukraine in light of the passage of a new budget which will, according to Hontareva, meet the IMF’s requirements. The central bank is also predicting a fairly-stable hryvnia. Bloomberg reports:

Ukraine’s government bonds due 2019 stayed unchanged, trading at 92.875 cents on the dollar as of 3:15 p.m. in Kiev on Tuesday, data compiled by Bloomberg showed. The hryvnia lost 1.85 percent to 23.9265 against the dollar. The 2016 budget’s envisioned hryvnia rate of 24.1 per dollar is “realistic,” although the estimate faces many risks, Gontareva said. Low prices for Ukrainian exports and the devaluation of other former Soviet countries’ currencies are adding pressure on the hryvnia, she said. 

Ukraine’s economic and political struggles are coming to light as the strain on the economy reaches its third year. Terrible economic corruption and stagnation sparked the Euromaidan revolution in 2014, Ukraine’s second revolution in a decade, but the war with Russia both further stressed the Ukrainian economy while the focus on defending the country against the Russian threat distracted from the economic and political problems at home. This is likely why The New York Times ran an editorial today calling for more investment in the struggling nation from three former American ambassadors to Ukraine: John E. Herbst, American ambassador to Ukraine from 2003-6; Steven Pifer, ambassador to Ukraine from 1998-2000; and William B. Taylor, Jr., ambassador to Ukraine from 2006-:

As former American ambassadors to Kiev, we recognize one of the main challenges in providing economic support to Ukraine: corruption. This is why any future assistance package must be made conditional on the Ukrainian government’s commitment to accelerate reform and root out corruption. The current Ukrainian leadership is far from perfect, but the seeds of accountability have been planted, and Ukraine’s robust civil society ensures a steady supply of nurturing sunlight. The recent resignation of a notoriously corrupt parliamentary kingmaker and the appointment of a new top anti-corruption prosecutor are signs of Ukraine’s progress.