Fixing Ukraine’s Economy International efforts to provide financial aid to Ukraine offer a chance to fix a troubled economy. But those efforts will help only if the country’s new leaders are willing to end bad policies like wasteful energy subsidies and take steps to increase exports. The International Monetary Fund estimates that the Ukrainian economy shrank 0.3 percent last year, after barely growing in 2012. Even though the country has to pay back about $30 billion in sovereign debt in the next two years, it spends billions of dollars on natural gas subsidies that have encouraged energy use, making the country overly reliant on fuel imports from Russia. Because of extensive corruption, the rich have easily evaded taxes, and the interim government says billions of dollars’ worth of gold reserves and loans have apparently been stolen by former officials and businessmen. Meanwhile, exports have suffered because the government refused to let the currency, the hryvnia, depreciate against the dollar and euro. Pegging the currency to the dollar was intended to control the costs of imports and protect Ukrainian banks from currency fluctuations, but that policy hurt exports, which fell an estimated 7.4 percent last year, according to the I.M.F. Only in the last few months was the hryvnia allowed to fall about 15 percent against the dollar and the euro, making the country’s farm and industrial exports cheaper in foreign markets... New York Times, Continued: nytimes/2014/03/14/opinion/fixing-ukraines-economy.html?_r=0
Posted on: Tue, 27 Jan 2015 22:42:31 +0000