Ukraine passes laws to battle financial crisis
Lawmakers backed severe restrictions
Ukrainian lawmakers on Thursday backed severe restrictions on public spending and a government-wide hiring freeze to help the economy survive the global financial turmoil, AP reported.
As the Ukrainian currency hit a new low, parliament gave tentative approval to legislation that would limit spending on renovating government buildings, purchases of automobiles and other public expenses. The law would be the latest in a series of measures to battle the crisis.
Ukraine has been one of the hardest-hit emerging markets during the global crisis, its export-oriented economy battered by the drop in world price for steel — the heart of the economy.
The hryvna traded close to 7.7 to the dollar Thursday, according to the Inter Business Consulting agency - a 52 percent drop since the start of the year.
The ex-Soviet republic has already received more than a quarter of a $16.4 billion emergency loan from the International Monetary Fund and is bracing for a painful recession in 2009.
President Viktor Yushchenko`s office forecasts the economy will contract by 5 percent.
"An immediate meltdown has been avoided by the IMF deal ... but a lot of challenges lie ahead," said Ozgur Guyuldar, emerging markets strategist at Raiffeisen Centrobank in Vienna. "Next year will be a wasted year."
Analysts said the IMF`s severe fiscal restrictions will lead to a sharp drop in domestic demand. That, coupled, with a fall in exports of steel, could lead to the bankruptcy of a number of corporations, unable to service or refinance debts.
The crisis has been aggravated by a paralyzing tug-of-war between Yushchenko and his likely rival in the 2010 presidential elections, Prime Minister Yulia Tymoshenko. The two are close to reviving their fractured coalition, but experts believe a new alliance would be short-lived.
In a nationally televised address late Wednesday, Tymoshenko blamed the hryvna fall on the Central Bank, an institution seen to be close to Yushchenko, himself a former central banker.
She also called for a number of populist policies, such a prohibiting banks from repossessing apartments and cars from lenders unable to pay their debt and keeping banks from raising interest rates on existing loans.