Page 58 - BNE_magazine_06_2020 Growers

58 I Eastern Europe bne June 2020
Ukraine parliament adopts IMF-demanded banking law
bne IntelliNews
Ukraine's parliament, the Verkhovna Rada, has adopted the so-called anti- Kolomoisky bank law in a final reading on May 13 that bans the return of failed banks to their former shareholders and clears the way for Kyiv to sign off on
a new International Monetary Fund (IMF) deal.
The IMF has insisted on the bill as a pre-condition to giving Ukraine a new Standby Agreement (SBA) that the government desperately needs if it is to meet its debt obligations this year and have enough money to deal with the economic stop-shock caused by the coronavirus (COVID-19) epidemic.
The law is designed to prevent oligarch Ihor Kolomoisky from retaking control of PrivatBank, which was nationalised in 2016 when the National Bank of Ukraine (NBU) found it had a $5.5bn hole in its balance sheet. Kolomoisky and his partners had looted the bank using shell companies and fake loans but have not been held accountable. Kolomoisky has since mounted a campaign in the courts to have the bank returned to his ownership, or at least to have the state pay $2bn in compensation. The NBU has accused Kolomoisky by name of mounting attacks on its staff in a “terror” campaign.
Ukrainian President Volodymyr Zelenskiy has struggled to get the bill passed as several deputies in his own fraction who are associated with Kolomoisky rebelled and refused to vote for the bill. Zelenskiy has had to rely on votes
from the opposition parties to get the bill through by only a margin of four votes.
Kolomoisky has pulled out all the stops to block the bill. Deputies associated with Kolomoisky introduced over 16,000 amendments to the bill after it was passed in the first reading in a dramatic midnight Rada session on March 30. Those amendments would have taken five months to debate until the Rada passed a new law that changed the procedures and allowed the deputies to vote on the amendments in bulk.
The controversial bill was supported by 270 MPs, well ahead of the necessary 226 votes for the law to pass. The Verkhovna Rada was considering the final readings of the bill according to a simplified procedure due to the record-high number of amendments.
During the parliament's extraordinary meeting on April 16, the bill was backed in the first reading by 242 MPs.
The simplified procedure allows the Rada to adopt any law in cases where MPs have filed record-high number of amendments to such a document, as happened with the banking bill, for which Ukrainian MPs filed about 16,335 amendments.
"Good news. Let’s see what Kolomoisky does next," Timothy Ash, senior sovereign strategist at BlueBay Asset Management, wrote in a short note immediately after the adoption of the document by the Rada.
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support that span the gamut of economic activity and include both private and publically owned companies – almost
all big employers.
What is new in the latest programme is the increased focus on small and medium-sized enterprises (SMEs) that are likely to suffer the most from the impact of the lockdown, as they have less in the way of reserves.
The Russian government will allocate over RUB80bn ($1.1bn) to SMEs affected by the epidemic, RBC business portal reported citing a decree signed by Deputy Prime Minister Andrei Belousov.
The second package specifically supported SMEs and employment among small enterprises, but was largely seen as not enough by analysts.
Previously the support pledged was seen as insufficient, as it makes only the companies that maintain over 90% of their staff versus March 2020 eligible for support. The decree signed by Belousov maintains the same criteria and estimates that 970,000 companies are eligible for state aid.
The cost of the crisis
April’s lockdown has cost the Russian economy up to 2% of its GDP growth this year, or about $150mn per week, and growth wasn't going to be that strong
to start with, the Central Bank of Russia (CBR) said on May 6.
The stop-shock to economic activity showed up very dramatically in the IHS Markit Russia Service Purchasing Index (PMI) data released on May 7 that crashed to an 18-year low of only 12.2 and the composite index, that includes manufacturing, dropping like a stone to 13.9 – the lowest levels on record and well below the 50 no-change mark.
This crisis is already worse than those in 2004, 2008 and 2014 and on a par with the financial meltdown in 1998 that lead to a 7.5% GDP contraction and destroyed the top tier of Russia’s banking sector, not to mention sending inflation and poverty soaring.