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Week’s balance: Cabinet sacks Nasirov, raises UAH 2.5 bln on 4G license sales, while Ukraine’s balance of payments retains surplus

Following a long saga of scandals, the government finally fired head of the Fiscal Service Roman Nasirov. Mobile operators paid UAH 2.5 billion for 4G licenses. The inflow of foreign currency to Ukraine exceeded the outflow. That’s what made the main news this week.

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At a regular meeting on Wednesday, the Cabinet finally moved to dismiss chief of the State Fiscal Service Roman Nasirov, who had been suspended as early as March 2017. The story of his layoff is a long one, and has attracted numerous scandals - one of the public anti-corruption organizations even managed to sue the Cabinet for failing to sack the official.

The Cabinet was delaying the decision for as long as possible, despite the fact that the law enforcers filed charges against Nasirov, accusing him of abuse of office, and despite his public row with Finance Minister Oleksandr Danyliuk.

According to the investigation, head of the SFS in 2015-2016, acting in the interests of MP Oleksandr Onyshchenko, initiated unsubstantiated decisions on tax debt installment programs for three companies, which inflicted damage to the state budget totaling almost UAH 2 billion. And while the consideration of the relevant criminal case in court looks far from over, the formal reason for Nasirov’s dismissal became his dual citizenship, which was previously confirmed by the British Embassy.

After Nasirov is dismissed, Cabinet of Ministers will have to announce a competition for the post of the new head of the Fiscal Service. Until the new top taxman is approved on post, ex-deputy head of the Vinnytsia State Tax Inspectorate, Myroslav Prodan, will remain the agency’s acting head.

Prime Minister Volodymyr Groysman also initiated an appeal to the president to dismiss Roman Romanov, head of the state defense concern Ukroboronprom.

At the end of last year, the head of government announced his intention to get the head of the state concern fired in connection with his failure to fulfill the government's order to pay off the salary arrears to the workers of the Mykolayiv Shipyard. However, only on Wednesday did the premier accelerate the issue.

"I recently said that I would not be working with the head of Ukroboronprom, Romanov. Today I propose to adopt a government decision on filing a motion to the president to dismiss the head of Ukroboronprom," Groysman told the Cabinet meeting.

At the same time, the government approved the appointment of a new member of the company’s  supervisory board, ex-Director of the Defense Advanced Research Projects Agency (DARPA), Anthony Tether.

"An effective supervisory board will ensure transparency in the operations of the state concern," First Deputy Prime Minister Stepan Kubiv said, commenting on the appointment.

Growth acceleration

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The Cabinet of Ministers seems to not have forgotten about its main task for 2018 - acceleration of economic growth. In the past week, the prime minister presented a package of 35 bills that, if passed by parliament in February-May, could accelerate the country's GDP growth to 5-7%.

According to the head of government, the bills provide for the introduction of a "single office" at all Ukrainian customs bodies, further reform of the State Fiscal Service, legislative introduction of a business ombudsman, establishment of the Financial Investigation Service, regulation of activities of limited liability companies in line with international standards, complex deregulation aiming at achieving progress in the Doing Business ranking, as well as deregulation in the oil and gas industry.

With the help of the National Bank, the Cabinet is also initiating facilitation of forex regulation, creation of conditions for affordable lending, compensation by the state for the cost of business loans, simplification of work of institutional investors, creation of commodity exchanges, protection of creditors and depositors of banks, and also intending to strengthen the protection of intellectual property.

"I am deeply convinced: I, together with the head of parliament and head of state will unite around the issue of the adoption of these bills," Groysman said ahead of the February 6 regular parliamentary session.

Mobile operators buying up 4G licenses

lifecell / video

The acceleration of the country's economic growth will be facilitated by the upgrade of the mobile communication format. In the past week, Ukraine’s largest operators - Kyivstar, Vodafone and Lifecell - bought from the state a license to launch 4G networks in the 2600 MHz band. The total cost of licenses based on the results of the auction held on January 31 amounted to almost UAH 2.5 billion, which was UAH 169 million more than the starting price.

In this case, the most popular band for 4G is a 1800 MHz band, which provides a larger coverage area. On the other hand, high frequency provides more simultaneous connections, which is important for large cities. The auction for the sale of licenses for the launch of 4G in the 1800 MHz band is scheduled for February 26.

Meanwhile, the operators have already announced an approximate timeframe for the launch of the new [for Ukraine] communication standard.

In particular, Vodafone plans its first 4G launches in late March, while full coverage is expected to be deployed only in July, after they obtain a license in the 1800 MHz range.

Lifecell intends to launch 4G in early spring, as soon as all the necessary procedures have been completed, according to the company CEO, Ismet Yazici.

Kyivstar seeks to launch 4G services in the second half of March.

Potentially, the introduction of this communication standard will accelerate Ukraine's economic growth by expanding the access of the population and business to high-speed broadband internet.

"A successful contest for the 4th generation communication licenses is a pleasing thing to see, not only in the context of almost two and a half billion hryvnias to the state budget. This is another step of Ukraine toward new modern technologies. A few years ago we implemented 3G, and now we are going further in building a successful country," Ukrainian President Petro Poroshenko said.

In order to use the 4G connection, you need to make sure that the SIM card, as well as your the mobile device, supports the new communication standard for Ukraine.

Balance of payments surplus


The National Bank published data on Ukraine’s balance of payments in 2017. According to preliminary estimates, the surplus amounted to $2.6 billion. The surplus at the end of 2017 was twice as much as in 2016. And this is in conditions when the deficit of foreign trade increased by 25% and amounted to $6.8 billion. In particular, the annual deficit of foreign trade in goods increased by 31.9% - up to $9.2 billion, the surplus of foreign trade in services - by 1.6 times, to $2.3 billion. Thus, throughout the past year, imports grew at a faster pace than exports.

Despite this, the balance of payments could be reduced with a surplus thanks in particular to the IMF tranche in the spring of last year, access to external borrowing markets, where Ukraine managed to attract $3 billion, as well as inflow of foreign direct investment. The latest, according to the NBU, in 2017 reduced by almost a third compared to 2016, amounting to a modest 3.3 billion dollars. As a result of the completion of most recapitalization programs, the volume of banks' conversion of debt into charter capital decreased in 2017 to $0.6 billion from $2.1 billion in 2016. Without these transactions, net foreign direct investment inflows in 2017 increased by 26% to $1.8 billion.

Nevertheless, it will be difficult to ensure a surplus in the balance of payments in 2018. After all, according to the data published by the Ministry of Finance, the total payments on the public debt in 2018 will amount to UAH 306 billion. This year, payments on the national debt are scheduled in the amount of UAH 176 billion, and servicing payments – at UAH 130 billion. At the same time, the expenses for servicing the state debt will amount to 14% of the expenses of the state budget’s general fund. Of the total amount of payments on state debt, 37% will be external payments.

A tranche of Ukraine’s key lender, the International Monetary Fund, will be rather difficult to get this year, as the country is required to create an anti-corruption court, bring gas prices to market levels and ensure a low budget deficit. At the same time, according to many experts, it is not worth to expect large investments in 2018.

Thus, the acceleration of reforms that allow Kyiv to obtain the necessary external funding and attract foreign investment interest can this year become one of the most important tools for preserving price and economic stability and accelerating growth.

The first working week of February will also be filled with interesting events. On Tuesday, the spring-summer plenary session of the Verkhovna Rada will begin, and on Friday the State Statistics Service promises to report on the level of inflation in January.

Maksym Shevchenko

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