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quickly to deal with the fall out from the pandemic.
But nothing the government can do can stop the economy taking a body blow. According to the consensus forecast, unemployment in Ukraine in 2020 will reach 9.4%, in 2021 some 9.1%, the ministry said reports Interfax.
That is going to cause Zelenskiy political problems. He has already been forced into open opposition to his former sponsor and mentor oligarch Ihor Kolomoisky, who is trying very hard to regain control over his PrivatBank that was nationalised in 2016. After the government bailed the bank out to the tune of $5.5bn the IMF has made keeping Kolomoisky’s hands off the bank a red line issue. Zelenskiy was unable to marshal his Servant of the People (SOTP) fraction in the Rada on the first vote on March 30 to approve the so-called anti-Kolomoisky banking law and had to rely on votes from his bitter rival Former President Petro Poroshenko to get the law through.
Kolomoisky has effectively used his proxies in the SOTP fraction to undermine Zelenskiy position and considerably weaken him. Zelenskiy main strength is now his continued support by the population and is the main source of his political power.
In the end both the anti-Kolomoisky banking law and a law to create a market for land from July were forced through the Rada by the end of April and so an IMF deal could be concluded by May. But almost as soon these laws were passed, the oligarchs launched a fresh attack, this time introducing laws to make it easier to sack the head of the National Anti-Corruption Bureau of Ukraine (NABU), which again the IMF said would be a deal-breaker if adopted. The month of May is likely to be as dramatic as the month of April.
More generally the revolving door to the Rada continues to spin with several more sackings in the last week of April, including the well respected new head of the customs service Max Nefyodov, who is responsible for putting the widely praised ProZorro electronic declaration system into place for civil servants income. No reason was given for the change. The head of the tax service and the health minister were also sacked. Analysts speculate that the Zelenskiy administration is under a general assault by all the oligarchs who are lobbying to put their placemen in positions of power, while Zelenskiy is attempting to pass the buck for the slow progress and shore up his personal approval ratings. Ukraine’s other top oligarch, Rinat Akhmetov, has also been a winner from the latest reshuffles.
One piece of good news is that despite the devaluation of the currency the National Bank of Ukraine (NBU) slashed rates by 200bp on April 23 – twice as much as expected – in an effort to give the economy a shot in the arm.
Inflation remains an issue, but it fell dramatically in 2019 as the NBU got its game on and the central bank says the fall in demand associated with the epidemic should act to constrain inflation and allow more rate cuts. The NBU expects to continue it’s easing over the rest of the year and will cut rates to 7% by year end. Provided the IMF deal is done the government says it plans to borrow $10bn from the market this year -- $4bn on the international capital markets and $4bn from the domestic market. Last year access by international investors to the local bond market was a huge success and saw over $5bn flow into Ukraine.
5 UKRAINE Country Report May 2020 www.intellinews.com
