Against the background of foreign media statements about a possible Russian invasion, the economic situation in Ukraine has worsened.
In 2022, the hryvnia rapidly depreciated against the dollar. The gold and foreign exchange reserves also decreased. At the same time, the threat of the spread of Russian military aggression to other regions of Ukraine caused a food panic — many Ukrainians began to buy an excess amount of goods just in case, reports the Chronicle.info with reference to Channel 24.
Together with Lubomyr Shavalyuk, an economic analyst, figured out which sectors of the economy were most affected by the hybrid war of the Russian Federation, how much money the State Budget is losing due to the panic moods of Ukrainians, and how to stabilize the economic situation in the country.
Currency panic and decrease in gold and foreign exchange reserves
In a month and a half since the beginning of 2022, the hryvnia has depreciated by 4.4% against the dollar US. According to the expert, «this is a very rapid pace, especially considering that in recent years the hryvnia usually tends to strengthen at the beginning of the year under the influence of seasonal factors».
Shavalyuk emphasizes that at the end of January the exchange rate on the interbank foreign exchange market remained at the level of 29 hryvnias per dollar for several hours. This is the highest value since the deep currency panic of early 2015, the analyst adds.
The consequences will become tangible over time — an acceleration of inflation due to higher prices for imported products, as well as domestically produced goods and services (for example, grain or oil), the cost of which is tied to world prices. The main consequence is a decrease in the purchasing power of Ukrainians' incomes. That is, subsequently, Ukrainians will become poorer, feel the currency panic in their pockets,
— says the expert.
From January 1 to February 11 of the current year, to smooth out excessive fluctuations in the exchange rate, the National Bank sold on the interbank foreign exchange market $1.56 billion< /strong> — 22% more than in general for the whole of 2021, Shavalyuk draws attention.
He says that for now, the NBU reserves are enough to smooth out the currency panic. However, the analyst suggests that the stabilization ability of the National Bank may be jeopardized if the situation becomes more complicated and reaches a different level of danger.
The fall in prices for government bonds and the fulfillment of public debt
According to the expert, there are problems in managing public debt in the country. He says that the yield to maturity of Ukrainian Eurobonds has increased significantly due to their sale on the global market.
Pay attention! Eurobonds or Eurobonds are government bonds placed on foreign exchanges in dollars and euro.
Three months ago, sovereign Eurobonds of Ukraine maturing in 2022 were traded with a yield of about 3%, and now they are traded with a yield to maturity of about 13-15%. This significantly complicates, and in fact makes it impossible to enter foreign markets with new borrowings, which creates an unnecessary risk of budget execution,” explains Lubomyr Shavalyuk.
According to him, until February 14 foreigners sold domestic government bonds (OVGZ) of Ukraine for more than 13.7 billion hryvnia. As a result, government bonds fell in price. Over the past three months, their yield to maturity has grown from two to four percentage points, the economist adds.
The state budget has problems not only with external borrowers, but also with the placement of new government bonds in general, the analyst draws attention. December 28, 2021, at the last auction for the initial placement of domestic government bonds, attracted almost 15 billion hryvnia. At the same time, from auctions held in 2022, the total amount raised barely exceeded UAH 13 billion in equivalent.
Pay attention! Ukraine's international reserves decreased by 5 in January 2022, 3%. Now in dollar terms, the amount of reserves is almost 30 billion dollars.
If this situation continues for a long time, it will create risks for the implementation of the budget,
Shavalyuk emphasizes.
Food panic and a decrease in foreign investment
An economic analyst says that there is a tacit agreement among foreign investors not to invest in Ukraine during a period of acute military threat. According to him, allegedly if any of the foreign investors planned some kind of capital investment, he «paused it».
Those who are already working here (we are talking about foreign investors — ed.) — are trying to withdraw the money they earn (for example, in the form of dividends) to a safe place. There are no statistics here either, but given the historical data, we are talking about amounts that are multiples of one hundred million dollars a week,
he says.
At the same time, the panic mood of Ukrainians caused the so-called food panic. Shavalyuk suggests that the threat of war is causing many Ukrainians to buy excess quantities of goods just in case. In his opinion, this allegedly allows manufacturers and sellers to raise prices more easily and unfairly make money on such a panic.
As a result, such actions (manufacturers and sellers — ed.) will hit the wallets of Ukrainians, but it is enough to assess the scale of this blow difficult,
— emphasizes the expert.
How to stabilize the economic situation in the country
According to the analyst, in order to stabilize the economic situation, it is necessary to work in several directions. First, Ukrainians should realize that Russia is a «permanent civilizational threatthat will not back down until it receives».
In- secondly, the country is in an enhanced mode fight against theft of budget funds, the expert believes. He adds that «with the help of international partners, we should fill the gaps that have arisen in the financing of the state, corporations, households».
Thirdly, it is necessary to reduce the pressure of the state on business, summarizes Lubomyr Shavalyuk.