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Week's balance: Naftogaz raises gas price for households, Cabinet allocates billions to help unemployed and miners, while budget deficit keeps growing

15:00, 31 October 2020
4 min. 324

State-owned energy giant Naftogaz of Ukraine has raised by a third the gas price for households, the Cabinet of Ministers allocated almost UAH 3 billion for salaries to miners and payments to the unemployed, while the State Treasury announced a fourfold increase in the country's budget deficit - these are the main economic developments in the outgoing week.

The last week of October will be remembered for the controversial ruling by the Constitutional Court, which rescinded Article 366-1 of the Criminal Code (inaccurate asset declaration by officials).

This caused a storm of discontent among ordinary Ukrainians, expert community, as well as the President's Office. On Friday, several thousand protesters rallied outside the CCU HQ in Kyiv against what they saw as a rollback of the anti-corruption reform.

President Volodymyr Zelensky on Thursday convened an urgent closed-door meeting of the National Security and Defense Council, following which a bill was drafted on dismissing all CCU judges, while the very CCU ruling was proposed to be considered "null and void".

Constitutional Court of Ukraine / Photo from UNIAN

"The crushing blows that are being inflicted on the country's achievements in the field of combating and effectively countering corruption in Ukraine cannot be ignored. An immediate and tough assessment is required of the decisions made by individual actors, whose actions are bringing more and more public threat," Zelensky said.

It is obvious that Ukraine runs the risk of undermining confidence of the international community and seeing cooperation with international creditors freeze, which would be extremely untimely amid the ongoing coronacrisis.

Meanwhile, the EU Delegation to Ukraine has warned that the Bloc's assistance to Ukraine, including financial one, is directly related to anti-corruption bodies that work independently, effectively, and free from political or other pressure.

It is likely that in early November, the theme of the anti-corruption reform being impeded by the judiciary will prevail. So we are yet to see heated discussions both at the Verkhovna Rada hall and at other venues.

Gas price rise

Photo from UNIAN

In the outgoing week, the state-owned energy holding Naftogaz of Ukraine increased the gas price for households in November by a third against the previous month – to UAH 6.33 per cubic meter.

"Changes in gas prices in November are primarily due to the seasonal factor and an increase in the wholesale price," the company explained.

It should be noted that in November, Naftogaz offered its consumers the lowest gas price among other suppliers.

According to the Association of Energy Suppliers, the highest price awaits the consumers of Zaporizhgazzbut – at UAH 8.96 per cubic meter. The average price across Ukraine increased by a quarter – from UAH 5.77 to UAH 7.16 per cubic meter.

Also, Naftogaz warned that the start of the heating season was under threat in 24 settlements due to the critical debts accumulated by local heating suppliers.

In addition to the capital, there are debtors in Dnipropetrovsk, , Zhytomyr, Kyiv, Odesa, Poltava, Kharkiv, Kherson, Cherkasy, and Chernivtsi, Donetsk, and Luhansk regions.

At the same time, many regions have already started or are launching the heating season.

Government payments

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At its meeting on Wednesday, the Cabinet decided to partially support Ukrainians financially affected by the economic crisis and pandemic. The government decided to allocate additional funds in the amount of UAH 1.3 billion from the COVID-19 Relief Fund for the payment of unemployment (including partial) benefits during the quarantine period.

According to the Minister for Development of Economy, Trade and Agriculture Ihor Petrashko, since quarantine start, more than UAH 10 billion in unemployment benefits, more than UAH 2.5 billion in partial unemployment assistance has already been paid, and 370,000 jobs have been saved.

The government also redistributed UAH 1.4 billion to pay wages to miners under the national program "Restructuring the Coal Industry".

As noted by the acting head of the Energy Ministry, Olha Buslavets, who last week met with the miners' professional union leaders, although the government plans to close mines in the eastern regions of Ukraine in the foreseeable future, this will be done in stages, allowing people to adapt to new conditions.

"We have no plans to shut everything down and dismiss people in one or two years. Everything will happen in such a way as to take into account all the needs of those living in coal regions. We need to show people the prospects where exactly they can make money and support their families," Buslavets stressed.

Another high-profile decision the government made was to redistribute almost UAH 62 million from the cancer research program for road repairs in Lviv region.

Prime Minister Denys Shmyhal explained that the move would not affect treatment of cancer patients, since a record amount was allocated to this end in 2020 anyway.

Incidentally, the other day the Finance Ministry reported on the expenses of the COVID-19 Relief Fund: more than half of the funds has already been utilized. In particular, about a third of the stipulated funds (UAH 5.8 billion) went for the healthcare sector and UAH 2.7 billion – for additional payments to medics, which is slightly less than half.

Budget hole expanding

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This week, the State Treasury Service reported that the state budget in January-September was executed with a UAH 81.7 billion deficit, which has quadruplicated on year.

The consolidated budget in January-September was executed with a deficit of UAH 58.9 billion against a surplus of UAH 8.7 billion for the same period in 2019.

Despite crisis, the sale of state-owned enterprises continues, which allows raising funds to replenish the state coffers. Last week, the State Property Fund sold three more companies that were part of the former national monopoly on alcohol production, Ukrspyrt. Thus, privatization of the six distilleries throughout October brought Ukraine over UAH 300 million.

Meanwhile, without explaining the reasons, the Cabinet took such major SOEs as Artemsil, State Food and Grain Corporation of Ukraine, and Bread of Ukraine, off the privatization list. Perhaps the time has not yet come for their sale, or perhaps the government considered them important enough for the country to be handed over to private investors.

Among this week's positive reports, there came the statement by the State Statistics Service on wages having grown by over 12% over the year. The average nominal wage of a full-time employee in September 2020 stood at UAH 11,998.

At the same time, wage arrears across Ukraine as of late September increased by 4% against the previous month, amounting to more than UAH 3.5 billion.

In the last week of October, the hryvnia kept sliding. On Friday, the National Bank's official rate was fixed at UAH 28.44 to the U.S. dollar as the hryvnia weakened by 4 kopiykas. For Monday, November 2, the regulator set the official rate at UAH 28.45 to the dollar.

Next week promises to be no less important for the Ukrainian economy. Lawmakers are set to consider the draft 2021 state budget, unless, of course, any new quarantine restrictions or an increase in the number of infected MPs become an obstacle.

According to weather forecasts, November will start with some cold snap and rain. Hopefully, this will not prevent Ukrainian farmers from successfully completing their harvesting campaign.

Anna Nahorna

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