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Nation    

Yushchenko warns about budget financing
Journal Staff Report

KIEV, Sept. 3 – President Viktor Yushchenko warned Thursday the government has been increasingly relying on money printing to finance widening budget deficit and that poses a “threat” to the stability of the hryvnia.

The warning comes as the hryvnia has faced a major downward pressure against the U.S. dollar, with bankers predicting the local currency was likely to continue to lose its value.

“The only threat that remains for the hryvnia is the weak budget policy,” Yushchenko told a group of reporters Thursday. “If we keep solving problems of poor budget planning through money printing, this puts every person under a blow.”

“That’s because devaluation and inflation are the blow for every person and for the national economy,” Yushchenko said.

The hryvnia closed at 8.80 per U.S. dollar in trading between commercial banks on Thursday, losing value quickly after opening at 8.65/dollars, dealers said.

The National Bank of Ukraine, which has been officially quoting the hryvnia at 7.7/dollar for most of the year, has been gradually depreciating the local currency – to 7.99/dollar on Thursday - in response to the downward pressure.

Prime Minister Yulia Tymoshenko said last month that keeping the stability of the hryvnia is the sole responsibility of the NBU - not the government - and said she believed that fair exchange rate was 6 hryvnias per dollar.

But Yushchenko said the widening budget deficit and the governemnt’s pressure to resort to money printing this year has been undermining the hryvnia.

Tymoshenko and opposition leader Viktor Yanukovych, at an emergency session last month, challenged Yushchenko by overriding his veto to open way for the NBU to print almost 10 billion hryvnias to finance infrastructure projects.

“I am against solving these issues at the expense of the emission by the NBU,” Yushchenko said. “This is a crime against the stability of the hryvnia.”

“Any emission - a billion or a billion and a half - will be a critically bad move against the hryvnia,” Yushchenko said.

Ukraine’s budget revenue fell sharply – by up to 20% - this year as many businesses had to shut down or stay idle as the economy had contracted 20.3% on the year in the first quarter.

The government managed to finance most of expenditures this year by borrowing from the International Monetary Fund, collecting taxes early from state companies and massively postponing tax rebates to exporters.

“Now, these resources are exhausted and the government is forced to print money,” Yushchenko said.

Bankers said the hryvnia will probably continue to face downward pressure and may lose value to trade at 9 hryvnias per dollar within the next month or two.

“It’s hard to get back to quoting earlier exchange rates because there is a frantic demand for the hard currency,” one banker said. “Everything gets converted to the hard currency.” (tl/ez)




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Currencies (in hryvnias)
  22.03.2024 prev
USD 38.92 39.14
RUR 0.424 0.422
EUR 42.47 42.44

Stock Market
  21.03.2024 prev
PFTS 507.0 507.0
source: PFTS

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