RESTRICTEDWORLD TRADE
ORGANIZATIONWT/ACC/UKR/55
5 June 1998
(98-2293)
Working Party on the
Accession of UkraineOriginal:  English
ACCESSION OF UKRAINE
Social and Economic Situation in Ukraine from January to April 1998
The following information concerning the social and economic situation in Ukraine from
January to April 1998 has been received from the Governmental Commission on Ukraine's Accession
to the WTO.
_______________
The current situation of the Ukrainian economic reality is characterized as follows:   the
development is held back by lack of operating funds, consumers poverty, and an unfavourable
environment for investments and credit.
The production growth is not accompanied by an adequate stabilisation of the financial
situation in most enterprises.  Although the quant ity of money has grown more than 7.0 per cent from
February through April 1998, the resulting funds were used to repay domestic and foreign debts of the
state, and not directed towards the corporate sector of the economy to stimulate aggregate demand.
In general, the real GDP for the period from January to April 1998 is estimated to be
approximately at the same level as during the same period last year.  Although in April the productionvolume of such an important branch of economy as industry decreased by 1.3 per cent its growth
remains positive throughout the year and is now recorded at 0.9 per cent.  Proceeding from the price
level established in January -April, the nominal GDP from the beginning of the year until the present
time is expected to be roughly UAH 28 billion.
Finance and budget
Despite a number of steps taken to improve revenue, the situation in this sphere remained
unsatisfactory.  For all practical purposes the aggregate revenues were UAH 5.69 billion or19.1 per cent of the amount planned for the year.
The revenues of the state budget are equal to UAH 2.9 billion or 67.3 per cent of the amount
planned for the quarter and 13.8 of the amount planned for the year.  The income deficiency is
1.4 billion UAH or 32.7 per cent.
Only 13.8 per cent of the planned annual amount of the VAT has been collected.  This is
equal to UAH 1.2 billion.  The main cause of the defi ciency is the increasing tax debt.  For example,
VAT deficiency has grown by almost UAH 570 million for the last three months and stands now at
UAH 1.5 billion.  The growing deficiency is influenced by barter operations between enterprises , the
decrease in demand for domestic products caused by a decrease in the public purchasing power, and
the absence of foreign markets.WT/ACC/UKR/55
Page 2
Excise tax receipts have been UAH 160.6 million or 15.6 per cent of the annual estimate.
Uncollected excise tax for the most recent three months has grown 3.5 times and stands now at
UAH 222 million.
Receipts for special allocated funds were 17.3 per cent of the amount estimates.  Thus the
Fund on Measures of Elimination of the Aftermath of the Chernobyl Disaster and the SocialProtection of the People has received UAH 372.6 million, or 14.4 per cent of the amount planned for
the year.  This sum includes respectively UAH 105.6 million. for the Social Insurance Fee (or 16.7 per
cent) and UAH 105.6 million. for the State Innovation Fund (or 12.6 per cent).
There has not been any breakthrough in the sphere of repayment of the general budget debt.
In the first quarter the amount of the restructured debt due to be repaid was UAH 72.1 million.
The Value Added Tax deficiency was 38.3 per cent of the total sum of the budget debt, the
income tax deficiency was 14.4 per cent, the land rent deficiency is 6.8 per cent, and the excise taxdeficiency was 5.7 per cent.
In the course of the current year appropriations were made practically at the same time as the
revenues were received.
In general terms, the expenditure of the aggregated budget from January through March 1998
was at UAH 6.8 billion or 20.3 per cent of the amount established for the year.
The excess of expenditure over income (deficit) is UAH 1,022.7 million or 30.3 per cent of
the annual budget.  UAH 62 million from domestic sources a nd UAH 1538.1 million from foreign
sources were allocated to cover the deficit.
The monetary and loan policy
The situation in the monetary and credit sphere during the period from January to April 1998
continued to be influenced by the conditions of both the international and domestic financial markets,
and by the measures taken by the National Bank, directed at reducing the effects of this crisis for
Ukraine.
In April, as in March, the monetary indicators continued to improve as compared to
January-February 1998.  Thus the monetary base in January-April 1998 increased by 2.5 per cent, ascompared to a 6.2 decrease in January-February.  The situation is the same with money supply.  Its
nominal value increased by 3.4 per cent in January-April, as compared to the end of 1997, in contrast
to a decrease in January--February of 6.6 per cent.
The National Bank of Ukraine account remained level at the end of March, that is at 41 per
cent, with the real monthly account volume in April standing at +2.1 per cent.
The account volume increased to 43.8 per cent in January; up to 48.7 per cent in February,
and up to 48.9 per cent in March as compared to 38.2 per cent in October 1997.
Credit, money, and securities market policies caused an increase in outstanding loans owed to
commercial banks.  They increased by 22 per cent in March as compared to the beginning of the year,
the increase in the foreign currency debts being at 11.5 per cent.  At the same time the debts in the
national currency decreased by 3.7 per cent.  The largest part of these debts (39.7 per cent) were loans
made to industrial enterprises.
The percentage of long term loans granted by commercial banks to subjects of entrepreneurial
activity increased somewhat in March and stood at 13.5 per cent, as compared to 10.8 per cent inWT/ACC/UKR/55
Page 3
March last year and 10.8 per cent at the beginning of 1998.  The outstanding debt on such long-term
loans increased by 28.3 per cent as compared to the beginning of the year.  Meanwhile, the
outstanding debts decreased by 1.3 per cent in Marc h.  Nevertheless, the amounts of long-term loans
are still insignificant.
The growing risks of unpaid loans forces commercial banks to increase the interest rate.  The
interest rate on commercial bank loans has been growing.  Excessive interest rates make loans too
"expensive" for subjects of entrepreneurial activity.  As a result, large amounts of loan firms cannot
find demand.  In such cases banks use the funds for currency transactions or the purchase of State
Internal Loan Bonds (SILB), which are practically safe and have a guaranteed income.
Due to the absence of tax incentives and adequate legal arrangements, commercial banks are
reluctant to grant long-term and investment project loans.
The Exchange Rate of Hryvnia
The official nominal currency rate of the hryvnia decreased by 7.5 per cent (from UAH  89.9
for US$100 on 1 January 1998 to UAH 204.1 for US$100 on 30 April 1 998).  The real rate has
decreased by 4.3 per cent.
From January to April the supply of US dollars in the Ukrainian Interbank Monetary
Exchange was at zero level in 60 out of 83 stock sales.  During this period the supply of US dollarswas at US$132.3 million, the demand exceeding the supply 6.8 times, was US$898.4 million
The sale of US dollars on the Ukrainian Interbank Monetary Exchange decreased as
compared to both March of this year (70.9 per cent) and the respective period in 1997 (99.8 per cent).
During the first four months of 1998 the amount of US Dollars, German Marks and Russian
Roubles sold was equal to US$1,023.98 million  That is, the sales were at 129 per cent, as comparedto the respective period in 1997.  At the same time, as the foreign currency supply from foreign banks
was insufficient, the US Dollars sales were conducted at 88.7 per cent due to sales interventions of the
National Bank of Ukraine, which caused a reduction in the currency reserves.  Net intervention of the
NBU in the Interbank Monetary Exchange amounted to US$771.3 min from January through
April 1998.
The Stock Market
The Law "On the State Budget of Ukraine for 1998" provides for the coverage of the budget
deficit by internal funding sources up to the amount of US$1,130.7 million
As of 28 April 1998, state internal loan bonds have been issued for the nominal value of
UAH 3,630.5 million  That is 31.6 per cent of the sum envisaged in a Resolution of the Cabinet of
Ministers.  As a result of such bonds, th e budget has been augm ented by UAH 2,665.1 million.
UAH 76.1 million of th is amount have been used to reduce the budget deficit, which is only 6.7 per
cent of the sum received from internal funding sour ces.  Payment of debts and dividends on the bonds
of previous issues comprised UAH 3,180.2 million, creating a deficit of UAH 515.1 million. These
results confirm that the "ceiling" on the issue of SILB had been exceeded, that there is no guarantee of
the receipts from the bonds exceeding interest payments and other debts on the bonds, and that there
is a danger of a slump in the SILB market.
Considering that earning rates on SILB remain  high (from 46.7 to 49.1 per cent), it cannot be
expected that the pressure on the state budget can be brought down without making substantial
changes in the SILB market, mainly by restructuring existing debts through the issue of long-termWT/ACC/UKR/55
Page 4
state bonds.  It is appropriate to issue short term bonds, including those nominated in foreign
currencies, wrong natural persons.
The national external debt
The national debt of Ukraine has increased  by UAH 992 million. as  compared to the
beginning of the year.  As of 1 April 1998 it amounts to US$10.547 billion.  Its growth is caused inthe first place by loans granted to Ukraine by fo reign commercial banks ( fiduciary loans ) in the
amount of US$1.519 billion.
A large part of this amount is represented by debts to the CIS countries (US$2.59 billion),
including Russia (US$1.896 billion).  The debt of Ukraine to the World Bank is US$1.221 billion, to
the European Union - US$352 million, to the European Bank of Reconstruction and
Development - US$66 million. The debt of Ukraine for international credit lines granted under the
guarantees of the government, is US$1.015 billion (the debt to Germany is US$453 min., the debt tothe US$447 million, the debt to Japan US$36 million, the debts to France and Italy US$34 million
each, the debt to Spain US$4 million, the debt to the International Bank of Reconstruction and
Development US$7 million.)
According to preliminary information at the Ministry of Finance, the budget expenditures on
repayment and servicing of the national external debt during the four months of 1998 amounts toUAH 751.9 million. Out of this money, US$556.9 million were appropriated to repay the debt,
US$192.2 million were appropriated for interest payments, and US$2.8 million were allocated to
other payments.
Prices and inflation
The wholesale price index in April, as compared to March, was 100.5 per cent, and as
compared to December - 102.9 per cent.  The tendency of stabilizing prices of industrial producers
has been maintained through April.  In oil extracti ng, oil processing, tire, silk, fur, sugar, macaroni,
alcohol, starch and some other industries a reducti on of prices was recorded during the four months of
this year as compared to December of the last year.
Wholesale prices for manufactured goods were somewhat higher this year due to an increase
in the price of electric energy by 4.4 per cent, fuel by 4.2 per cent, natural gas by 30.5 per cent.  Prices
for products of light and food industry increase d in April by 1.4 and 2 per cent respectively.
The consumer price index stood at 101.3 in April in comparison to March.  The consumer
goods and services prices increased from the beginning of the year by 3 per cent, as compared to
4.3 per cent increase during the first four months of the previous year.  In the course of April the
prices for food products increased by 1.9 per cent, other products became more expensive only by
0.1 per cent, and prices for services increased by 1.1 per cent.
Among food products, the greatest price increases were eggs (by 21.8 per cent), and oil (by
10.6 per cent).  Prices of most of the other goods remained unchanged.  Among paid services, the
subscription phone charges increased by 40.9 per cent and charges for trunk-line connections
increased by 15.2 per cent.
Industry
Industrial output grew worse in April 1998, mainly due to serious problems in heavy industry.
When the production in selected industries is compared between the output in March 1998, and
April 1997, the differences are as follows:WT/ACC/UKR/55
Page 5
- electrical energy 24.1 and 8.0 per cent respectively;
- fuel industry 9.0 and 3.7 per cent;
- ferrous metallurgy 5.7 and 5.5 per cent;
- machine building and metal processing 3.5 and 5.1 per cent.
Comparing the figures of April 1998, with those of March 1998, the following declines are
observable:
- non-ferrous metallurgy by 5.4 per cent;
- chemical and petrochemical industry by 1.9 per cent;
- wood, pulp and paper industry by 3.8 per cent.
On the whole, the industrial output declined by 7.1 per cent from March to April, 1998.  This
means a reduction of 0.9 per cent in industrial growth during the period of January-April 1998 ascompared to a decline of 1.7 per cent in the first quarter of the previous year.
Mining
Production in mining and the metallurgical finished products sector -finished rolled steel
products and steel pipes - decreased by 4.2 and 20.9 per cent respectively in January-April, 1998.
Production of certain secondary types of products increased by 2.1-6.6 per cent.  The highest growthwas in coke production (10.1 per cent).  The reductio n in the production of finished rolled products
and steel pipes was caused by a lack of demand for them in the external market and the absence of
solvent consumers in the domestic market.  Thus, the export of finished rolled products decreased by
12 per cent due to the worsening of the situation for metal products in the world market, a number of
anti-dumping investigations, and the financial crisis in Southeast Asia.
The difficult financial condition of ferrous metallurgy industrial sector, coupled with its
continuous deterioration, does not indicate this industrial sector becoming stable in the future.  An
important problem is the replenishment of the working capital and the restoration of cash settlements
between producers, consumers and suppliers of products, raw materials and energy.
In non-ferrous metallurgy during January-April 1998, as compared to the same period in
1997, production of ore concentrates of non-ferrous  metals increased by 11.1-16.3 per cent, aluminum
oxide by 8.7, primary aluminum by 9.6, and seconda ry aluminum by 52.0 per cent.  Production of
lead from give-and-take raw materials increased by 62 per cent.
At the same time production of crystal silicon declined by 47.6 per cent due to lack of
demand.  Production of zinc and ferro-nickel did not increase.  During the first four months of 1998,
as compared to the same period in the previous year, the volumes of industrial production in non-
ferrous metallurgy went up 13.5 per cent in comparable prices.
Chemical
As for the chemical and petrochemical complex, comparing April 1998 figures with those of
March 1998, production of soda ash increased by  4,000 tons or 10.7 per cent, soda caustic by
1,000 tons or 8.4 per cent, mineral fertilizers by 11.2 thousand tons or 7.2 per cent, low-pressure
polyethylene by 0.2  thousand tons or 2.1 per cent.WT/ACC/UKR/55
Page 6
The procedure of reimbursement of expenses for the transportation of natural gas which is
being supplied to enterprises producing mineral fertilizers, introduced by the Resolution of the
Cabinet of Ministers of Ukraine No. 977 of 3 Se ptember 1997, brought about a positive impact on the
situation in the chemical complex.  The expenses are reimbursed from the funds received from the
transit of Russian ammonia and remaining after budget reconciliations and settlements with ammoniacarriers.  This action helped to suspend further decline in production and a price increase for nitrogen
fertilizers.  In April production of other types of chemical products (ammonia, sulphuric acid,
polyvinyl chloride resin, chemical fibres and threads) continued to decline.
The industry was negatively influenced in 1997 and the first quarter of 1998 by a reduction of
more than twice the amount of the world price for ammonia and carbamide, by the increased charges
for transportation of natural gas through the territory of Ukraine, high level of barter operations
(nearly 50 per cent in the industry and up to 90-95 per cent in the petrochemical sub-industry), the
requirement to keep and operate social amenities attached to the industrial enterprises, the high level
of energy  and other resource consumption in the process of production.
Coal
In the period under review operation of coal mi ning enterprises stabilized to some extent.
The total volume of coal extraction reached 27.5 million tons, including 11.4 million tons of
coke coal.  The initial task was fulfilled by 100.8 and 115.2 per cent respectively.  As compared to the
corresponding period in the previous year, the total volume of coal extraction increased by 1.0 million
tons (3.9 per cent).
However, due to the lack of financing for the purchase and repair of mining equipment, it
appeared practically impossible to improve the technical and economic aspects of the industry.  Thisresulted in a failure to implement the programme of putting into operation new drilling holes, an
absence of spare parts and units to replace the mining equipment which had outlived its operating life,
and a drain of experts with the required basic qualifications resulting directly in a higher rate of
accidents.
The financial situation in the industry is being complicated by non-payments on the part of
coal consumers and a large proportion of barter settlements which accounts for nearly 80 per cent of
all transactions, and reaching 90 per cent at some coal enterprises.
Oil and Gas
Over the first four months of 1998 oil and gas extraction enterprises extracted
1,304.8 thousand tons of oil with gas condensate (95.3 per cent as compared to the corresponding
period in the previous year), gas - 6,001 million m3 (101.4 per cent as compared to the corresponding
period in 1997).
Using the rent payments for oil and part of the rent payments for gas, 15.5 thousand meters of
exploratory drilling took place representing a 240 per cent increase over the drilling during the
corresponding period in the previous year.  The total volume of exploratory drilling amounts to
83.9 thousand meters in January-April 1998 representing 99 per cent of the drilling undertaken during
the same period on 1997.
From the beginning of the year the debt receivable for gas at the enterprises managed by
Derzhnaftogasprom (State Committee for O il and Gas) increased  from UAH 6,316 million on
1 May 1998 to UAH 7,480.7 million.  The level of payments for gas decreased from 39.5 per cent in
the previous year down to 17.3 per cent.WT/ACC/UKR/55
Page 7
The low level of collections gives rise to th e problem of the enterprises not being able to
contribute to the budget and raising wages to its own employees.  As of 1 May 1998 the accounts
payable in oil and gas industry amounted to UAH 1,526.0 million.  Wage debt increased from almost
40 per cent at the start of 1998, to UAH 61.1 million on 1 May 1998.
From the start of 1998, 4507.1 thousand tons of oil were supplied to the oil refineries of
Ukraine, of them Ukrainian oil amounted to 875.6 thousand tons, that is 10 per cent less as compared
to the supplies in the first four months of the previous year.  Oil supplies from the Russian Federation
grew by more than 73 per cent and totalled 2,486.3 thousand tons.  In the same period oil supplies
from Kazakhstan went down by 17 per cent and totalled 1,145.2 thousand tons.
Despite the increased import supplies, the problem of an overload of crude oil in domestic oil
refineries is far from settled.  First, this results from favourable conditions for the import of crude oil
from the Russian Federation, the share of Russian oil in the total volume of import amounting tonearly 69 per cent.  At the same time supplies from the Russian Federation are being hampered by the
reduction of oil extraction in the Russian Federation due to a decision by the Russian government as a
first priority issue to ensure the fulfilment of its export obligations under agreements with Western
countries.
From the beginning of 1998 production was as follows:- benzine for motor vehicles: 929.6 thousand tons;
- diesel fuel: 1,274.4 thousand tons
- fuel oil (mazut): 1,458.7 thousand tons
which compared to the corresponding period of the previous year, amounts to 133, 118 and 102 per
cent respectively.
Energy
Over the first four months of 1998 electricity output in Ukraine was 63.9 billion kWh
(98.5 per cent of the level reached in the previous year).
Decline in electricity production is caused by a continuing general economic decline in the
country and, respectively, by a decrease in electricity consumption in the industry and in otherbranches of economy, and also by the inability of consumers to pay and, as a result, by the inability of
the industry to procure the required quantity of organic fuel.
As above as of 1 May 1998, according to the above mentioned data, the debt of Minenenergo
(Ministry of Energy) enterprises (excluding nuclear plants) to its suppliers amounted to
UAH 5,307 million, including for coal UAH 768 mill ion, for gas UAH 2,125 mi llion, for mazut
UAH 124 million, to nu clear power plants UAH 1,688 million.  In additi on, the debt owed to the
banks for credit was UAH 165 million.  The debt receivable was UAH 3,857 million.
In April enterprises managed by Minvuhleprom (Ministry of Coal Industry) supplied
66.7 thousand tons of coal per day, while scheduled to supply 67.2 thousand tons per day.  But due to
the importation of coal, the inventory began to grow.  As of 1 May 1998 coal inventory was
2,674 thousand tons as compared to 1985 thousand tons during the corresponding period in the
previous year.  The mazut inventory decreased - 372 thousand tons versus 518 thousand tons in the
previous year.WT/ACC/UKR/55
Page 8
During the first four months of 1998 there has been a continued decline in machine-building
production (-4.2 per cent versus January-April of 1997).  The overall wage debt is currently more than
5.3 months.  Production of tractors, motor-driven cranes, metal-cutting tools, excavators, etc., has
declined.
Machines
Machine-building production is being slowed  down by the lack of working capital at
enterprises, the need to maintain objects of social  infrastructure attached to the industry and low
payment capacity of customers.
The professional low quality of documents required for the receipt of Government guaranties,
reviewable by the Currency and Credit Council, has hampered the establishment of joint ventures with
such firms as "John Deere" and "Hege" on launching the production of grain-cropping combines.
There is a stable trend in the export of certain types of machine-building products.  Thus,
OJSC "Motor-Sich", in the city of Zaporizhzhia is exporting aircraft engines to the CIS countries,
Kharkiv State Aviation Enterprise continues to supply airplanes AN-72 and AN-74 to the Islamic
Republic of Iran, VO "Malyshev Pinirt"', in the city of Kharkiv supplies special-purpose products to
Pakistan with the deliveries taking place on schedule.
Transport
During the first four months of 1998 transport operated satisfactorily.  The volume of cargo
carried by all means of transport was 564 million tons. that is 0.2 per cent less than during the first
four months of 1997.
The volumes of cargo carried by rail increased by 8 per  cent versus the corresponding period
in the previous year, and amounted to 95.8 million tons.  The increased volumes of cargo carried bysea (by 10 per cent) and river (by 15 per cent) transport as compared to the first four months in the
previous year.
Accordingly, it may be concluded that carriage of cargo has operated satisfactorily.  The
existing transport facilities permit further expansion in the trade and production.
308.3 million people were carried by public transport, exceeding the number of people carried
during the corresponding period in the previous year by 8.8 per cent.
Building materials
In the building material industry the output  of "Ukrbudmaterialy" Corporation grew by
2.7 per cent in April 1998 as compared to March 1998, and by the output of "Ukrcement" Concern by
26 per cent.  Prices for basic building materials remained stable despite continued measures in the cost
of fuel and energy.  As a result, the inventories of building materials are gradually decreasing.
During the first four months of 1998 the level of building materials increased as compared to
the corresponding period in the previous year: cement by 2.4 per cent, wall materials by 2.2 per cent,
non-ore materials by 76.9 per cent, asbestos--cement sheets by 37 per cent, tiles by 28.3 per cent,
sanitary ceramic products by 41.3 per cent, radiators and convectors by 13.1 per cent.  However, a
negative trend in the production of glass, baths products, and linoleum continues to persistWT/ACC/UKR/55
Page 9
Consumer goods and services
Production of consumer goods during January-April 1998 may be characterized by a gradual
increase of production (at enterprises of machine-building and chemical complex in light and
wood-working industry, and at enterprises subordi nate to the "Ukrmiscevprom" Concern).  The
growth of production as compared with the corresponding period in the previous year was 3.0 per centversus a 21 per cent decline in that year.
During the reporting period production of refrigerators, washing machines, vacuum cleaners
increased.  The competitiveness of these products (refrigerators "Nord"and vacuum cleaners "Kmet"
and "Artem") is improving.  At the same time the state of production of home appliances at
enterprises of electronic industry (TV sets, tape recorders) is not satisfactory.  During the first four
months of the previous year the rate of decrease of production of these items was: TV-sets - 49.1 per
cent, tape recorders - 49.6 per cent, radio devices - 80.5 per cent (in 1996 67.7 per cent, 61.4, 29.8 percent, respectively).
Compared to January-April 1997 production of light industry articles increased by 4.5 per
cent.  Production of fabrics in the first four month of 1998, as compared to the corresponding period
in the previous year, increased by 14.1 per cent.  Especially high growth rate (nearly 90 per cent) was
observed in the production of cotton fabrics.  Production of wool fabrics increased by 30 per cent,although production of flax and silk fabrics, footwear, hosiery and knitted fabric articles decreased.
The general situation in the production of consumer goods is far from stable.  Due to high
prices, poor quality, and low payment capacity of potential customers, which tends to aggravate with
the rise in electricity and public utility costs, sales are slow, and nearly all products remain in
warehouses.  As of April 1, 1998, 50 per cent of all fabrics during this period, 62 per cent of footwear,13.5 per cent refrigerators, 28 per cent of washing machines and vacuum cleaners remained unsold.
Unsold inventories include 72 thousand electrical irons (production in the first quarter of 1998 -
15 thousand items), 6,748 tape recorders (4,561 items), 859 motorcycles (73 items), 1,944 thousand
knitted fabric articles (1,365 thousand articles).  As a result, solvency of enterprises (accounts payable
exceeding debts receivable by almost two times) is decreasing, but at the same time there are nobankruptcies, and the bankruptcy procedure has not becomes recognized method in the restructuring
of enterprises.
Food production in January-April of 1998 stabilized somewhat.  There was a continued
increase in production of confectionery, tobacco, macaroni, cereals, champagne, beer, alcoholic and
liquor-alcoholic products, mineral water, non-alcoholic beverages, etc., as compared to the
corresponding period in 1997.
However, a negative trend was observed in the meat industry where production went down.
Production of meat and sub-products of the first category, semi-finished meat products, sausage
products, and canned meat declined due to the fact that during the first four months of 1998 the
volume of cattle and poultry delivered to the processing enterprises was almost twice as low as
compared to the value in the corresponding period of the previous year.  Not a single oblast managed
to increase the supply of these items for industrial processing.
In April production of sunflower oil was less than 80 per cent of the quantity produced in
April 1997.  This was due to the insufficiency of domestic and give and take oil raw materials
available for industrial processing as a result of the unregulated export of sunflower seeds.
Importation into Ukraine of 120 thousand tons of raw sunflower oil with its further refining at
the oil purifying plants may partially solve this problem.  A draft of the relevant Presidential Decreehas been prepared by Minagroprom (Ministry of Agriculture) and agreed upon with the ministries and
departments concerned.WT/ACC/UKR/55
Page 10
The situation with the production of soap is di sastrous.  In April production of household soap
almost stopped, while production of toilet soap decreased almost four times as compared to
April 1997.  At the same time the Ukrainian market is being filled with imports, in particular from
Turkey, India, etc.  However, Minagroprom does not take appropriate measures to improve the
situation, mainly to improve the quality and packaging of domestic products.
During the first four months of the current year the Ukrainian consumers were provided with
services to the amount of UAH 2.9 billion.  As compared with the previous year, reduction in the sale
of such services has slowed down, with comparable prices varying within 2-3 per cent above the level
of the corresponding period in 1997.
Educational services, provided by the institutions of secondary vocational and higher
education, legal services and bank institutions, healthcare and communications enterprises have
continued to develop.  Passenger transportation services have improved.
Reduction in the volume of paid services is in general related to the crisis of non-payments
for public utility services already provided.  The debt owed by residential customers as of
10 April 1998 was UAH 2,664 million.  In March residential customers paid for public utility services
66 per cent of the amount billed.  Debt delinquencies of more then two months represented 40.7 per
cent of the total residential accounts.
No significant changes took place in the consumer market of Ukraine in April 1998.  The
volume of goods offered in both organized and non-organized markets met the limited money
resources of the population.
Based on the estimates of commercial earnings, the volume of retail trade turnover in April
reached nearly UAH 1,500 million, and during  the first four months of the current year it amounted to
nearly UAH 4,600 m illion.  As compared to the corresponding period in the previous period, the
volume of retail trade turnover at current prices increased by nearly 2 per cent while in comparable
prices it decreased by 2-2.5 per cent.
Agriculture
The agricultural situation continues to be difficult.  Field works in the spring were carried out
with considerable difficulties.  Insufficiencies of oil and lubrication materials were observed in a
portion of farms.  Due to the amortization of machinery and tractors, breakages and stoppages of
agricultural equipment, spring crops were sown on 8,169.3 thousand hectares area as of 5 May 1998,
which is 57.8 per cent of the expected area to be sown.  It included 3,977.9 thousand hectares or
76.3 per cent of cereals and grain legumes (except corn).  Situation with sugar beet is a little bit better.
It was sown on 807,9 thousand hectares area (80 per cent of the planned area).
In cattle-breeding a slight increase was achieved in the volume of live-stock when compared
to the volume at the start of 1997.  Live-stock of cows increased in all categories of farms by 4
per cent, pigs - by 2 per cent, sheep and goats - by 12.5 per cent.  Increase occurred mainly within the
private sector.  At the same time, live-stock of cows decreased by 14 per cent, pigs by 9 per cent,
goats by 4 per cent, sheep -by 20 per cent, poultry of all types by 0.4 per cent in comparison to the
same period in the last year.
Positive changes could be observed in productivity of animals and poultry.  An average
milking increased by 35 kilos from the beginning of the year due to a better supply of fodder as
compared with the preceding year.  Eggs per hen increased slightly.  Animal mortality decreased
significantly.WT/ACC/UKR/55
Page 11
The financial situation of agricultural producers remains difficult.  According to
Minagroprom (the Ministry of Agroindustrial Complex of Ukraine), accounts payable to suppliers
comprised UAH 772.8 million as of 15 April 1998.  Debt of the processing industry to agricultural
producers amounted to  UAH 26.9 million, including UAH .0.2 million for dairy products,
UAH 7.2 million fo r meat products and UAH 2 million for wool.  The debt to the "Ukraine" Bank
continued to increase for both long-term and short-term loans.  It amounted to UAH 86.7 million as of
1 April 1998.
Agricultural production from the beginning of 1998 was 97.3 per cent compared with the
appropriate period of the last year, including 93.7 per cent on the farms of the public sector and
99.1 per cent in the private sector.
Reforming of the production systems on the basis of the privatisation of state enterprises,
sharing of assets, and corporatization of collective farms in the field of agroindustrial complex isalmost completed.  But these reforms have not lead to the expected result.  Absence of a land market
prevents agricultural producers from being able to use their fixed assets as a guarantee for loans.
This, in turn, leads to a drastic limitations in the working funds and creates difficulties with purchases
of fertilizers, fuel, machinery, seeds, etc.
Twenty-three agrarian exchanges, operating on the agricultural market, sold products for
UAH 2.41 million during April and for UAH 4.03 million from the beginning of this year.  It is 78 per
cent less than during the same period last year.  In other words, agrarian exchanges do not play their
appropriate part in the creation of a market environment in the agroindustrial sector of the economy.
Increased costs of their services, complaints by buyers about high and by sellers about low prices, and
other shortcomings point to their inefficiency.
Investment activity
According to preliminary information, about UAH 2.5 billion of capital investments were
made in January-April of this year.  They represent 18.5 per cent of the annual estimate.  The state
capital investments within the first quarter repr esented UAH 7.54 million or just 2.2 per cent provided
for 1998.
Activities within construction complex stabilized to some extent.  Sub-contractor construction
organizations of all ownership types and different forms of businesses carried out works with their
own resources amounting to UAH 1.4 billion.  It is 2 per cent more compared to the same period last
year.
The holding company "Kyivmiskbud" increased its volume of work by more than 42 per cent,
and Ukrtransbud Corporation by more than 7 per cent.  Performance time of sub-contract works
improved in the following corporations: Ukrbud, Ukrmontazhspetsbud, Ukragroprombud (up to10-12 per cent compared to 36-50 per cent during the last year).
Low pace of construction works occurs, first of all, due to the absence of finance for objects
the construction of which is funded by the state budget.
About UAH 16 million of capital investments we re used for the construction of objects
related to the liquidation of the Chernobyl NPP accident consequences.  It is 60 per cent less thanduring the appropriate period of the last year.
Chernobyl construction program received UAH 31,145 million during January-April of 1998.
This is 10.3 per cent of the annual allocation.WT/ACC/UKR/55
Page 12
During the first four months of 1998 foreign investments increased. 448 foreign investments
amounting in total US$190.9 million were registered.  More than a half of their total occurred in
April.  By comparison, 692 foreign investments amounting to US$180.7 million were registered
within the first four months of the last year.  In addition to foreign investments, Ukraine has been
obtaining foreign loans under the international , intergovernmental and inter-bank agreements since1992.
Within the first three months of 1998, Ukreximbank, as an agent of the Government for the
servicing of foreign loans with the help of guarantees by the Cabinet of Ministers of Ukraine,
arranged loans amounting to US$169.1 million.  Loans in the amount of US$52.2 were obtained
under previously signed agreements.
The largest portion of loans obtained since 1992 were made within the agroindustrial complex
(62.2 per cent), including repayments from the state budget representing 76.2 per cent.
Loans amounting to US$73.5 million were repaid within the first three months of this year.
Since 1992, actual (current) principal on foreign loans amounted to US$1.01 billion (as of
1 April 1998), including the ov erdue amount of US$0.55 billion.
Internal overdue debt of foreign loan borrowers to the state budget was US$547.1 million as
of 9 April 1998, including the debt by "Ukragrotekhservice" Concern for US$144.7 million (under aloan obtained for agricultural machinery purchase).
Foreign economic activity
Pursuant to the preliminary information, supplied by the State Customs Service of Ukraine,
and the additional calculation of goods that did not enter with customs declarations, foreign trade
turnover in goods during January-February of 1 998 amounted to US$3.85 billi on.  This amount was
12 per cent less than during the same period last year.
Exports of goods amounted to US$1.66 billion.  Imports were US$2.19 billion.  This is
7.8 per cent and 15 per cent less respectively than during the same two months of 1997.
The total balance in goods trade was negative.  It amounted to US$527.8 million.
A stable tendency in the re-orientation of the Ukrainian foreign trade towards markets in other
countries of the world and a decrease of trade with CIS countries and the Baltic States was evident
during the first two months of 1998.
For example, foreign trade turnover with CI S countries and the Baltic States amounted to
US$2.06 billion. This is US$642  billion less than during the same period of last year.  Export of
goods to CIS countries amounted to US$584.12 million, 30 per cent less than during the same period
for 1997.  Imports amounted to US$1478.0 million, a decrease of 21 per cent.  A negative balance in
trade with CIS countries was US$893.4 million.
Foreign trade turnover in goods with other countries of the world was US$1,79 billion during
the first two months of 1998, an increase of 7 per cent over the same period last year.  Export of goods
increased by 11.3 per cent; import remained at the same level.  There was a positive balance of
US$366.05 million.
Institutional transformations
329 state-owned objects were privatized within the first quarter of 1998.  Privatization within
particular groups were as follows: A - 104 objects, B, V, G - 168 objects, D - 31 objects andWT/ACC/UKR/55
Page 13
E - 26 objects.  In general, the most prevalent method was the sale of stock.  It was used for
56.84 per cent of all privatized objects. 22,8 per cent used auctions, and 15.5 per cent were purchases
by associations of purchasers.
Less than 3.04 per cent of objects were privatized by means of commercial auctions,
1.22 per cent by means of non-commercial auction, 0.6 per cent through leases with purchase options.There were no purchases under an alternative plan.
During the first quarter of 1998, 1068 objects of communal property were also privatized by
privatization authorities pursuant to agreements with local government bodies. 1007 of these objects
belonged to Group A. 59.7 per cent were small privatization objects bought by associations of
purchasers, 20.6 per cent were sold at auctions, 9 per cent were privatized by means of commercial
auctions, 7.5 per cent -through leases with purchas e options, 2.5 per cent at non-commercial auctions,
6 objects (or 0.6 per cent) by sales of stock, and 1 object by a purchase under an alternative plan.
During the first quarter of the year 273 packages of stocks of 271 open joint stock companies
with the total face value of UAH 5,376 thousand were offered for sale on Ukrainian stock exchanges
and in over-the-counter trade systems for cash. 126 pack ages of stock were sold.  The value of stock
sold below face value and by means of signed agreements amounted to UAH 47,467.6 thousand and
UAH 77,473.5 thousand respectively.  Increases of prices  over and above face value occurred in 61
transactions and were equal to 1.63 times the face value.
Terms and conditions of 54 auctions were publicized in the first quarter with the aim of
increasing revenue for the state budget from the privatization of state property.  Competitive sales of
13 packages of stocks were conducted.  They resulted in the formation of sale-purchase contracts for
the aggregate amount of UAH 29.3 million.  UAH 1 07.4 million of receipts is expected from these
transactions in the second quarter of 1998.  UAH 20.9 million were obtained within the first quarter of
1998 as a result of competitive sales of packages of stock during the fourth quarter of 1997.
UAH 134.7 million were obta ined from the privatization of state property objects in the first
quarter of 1998. 98.84 per cent of funds obtained were added to the government budget; among them
99.99 per cent to the state budget and 0.01 to the local budget.
Regional departments of the State Property Fund of Ukraine obtained UAH 2 9.75 million
from the privatization of communal property objects within the first quarter of 1998.
There were no significant changes in the field of small and medium-sized entrepreneurships
during January-April of 1998.  The process of creation of small enterprises in all regions proceeded
slowly.  For the time being, about 40-60 per cent of all registered small enterprises are actually
operating; one third of them operates sporadically; many face the risk of liquidation because of non-
compliance with capital requirements and insufficient sales.
Issues that restrain the development of business agent activities and elements of the market
infrastructure are still current.  Mainly, it is the instability of normative and legal bases: unresolved
ownership relations, in particular private ownership of land, complicity and imperfection of
registration and licensing processes, limitations on an access to financial and technical resources,
absence of an integrated system of financial and credit support, an onerous taxation system, and otherreasons.
Presidential Decree No. 79/98, dated 3 Febr uary 1998, "On Removal of Restrictions that
Restrain the Development of Entrepreneurial Activities" was issued to decrease intrusion of the state
authorities into entrepreneurial activities, to  remove legal, administrative, economic and
organizational barriers to the development of entrepreneurial activities, and to implement newapproaches to state regulations.WT/ACC/UKR/55
Page 14
A single list of entrepreneurial activities not requiring licensing was established.  This list
reduced licensing requirements from 112 to 42 types of activities.
Situation of the labour market
779.4 thousand unemployed were registered with the State employment service as of
1 May 1998. 324.4 thousand of the unemployed were registered since the beginning of this year.
The level of chronic unemployment increased from 2.33 per cent as of 1 January 1998 up to
2.85 per cent as of 1 May 1998.  In particular, chronic unemployment was strong in Temopil,
Zhytomyr, Lviv, Volyn, Chemihiv and Ivano-Frankivsk oblasts - 4.3-5.6 per cent.
Demand for labour constantly decreases with a simultaneous increase in the number job
seekers. 816.5 thousand unemployed persons were regi stered with the State employment service as of
1 May 1998, and there were only 47.3 thousand registered vacancies at that time.  Correspondingly,
there were 17 persons per one vacancy on the average, among them there were 13 persons per manualworker vacancy, 27 persons per office worker vacancy of office worker, and 28 persons per vacancy
of worker without special qualification.
In fact, 61.1 thousand persons were dismissed from  the labour force since the beginning of the
year.  The State employment service sent 19.4 thousand persons to professional training.
13.4 thousand of unemployed persons participated in public works within the first quarter of 1998.
Salaries
Salary levels throughout the whole economy were low in January-March 1998.  Compared
with December 1997, a nominal salary calculated in March (UAH 163) decreased by 7 per cent, a real
decrease of 9.1 per cent when taking into account the inflation rate.  In fact, salaries remained at the
level of July 1997.
Increases in the salaries in March this year oc curred mainly due to an increase in working
hours compared to the previous month.
The most crucial unresolved social issue in the economy is the untimely and late payment of
salaries.  From the beginning of the year unpaid salaries in arrear constituted 57.4 per cent of all
salaries; in industry 59.0 per cent, in agriculture 70.3 per cent, on transport 51.6 per cent and inconstruction 64.6 per cent.
About 11 million of employees involved in all fields of the economy failed to receive salaries
on time.  More than three million of employees did not receive salaries for more than six months.  The
majority of non-payments took place in enterprises with a collective type of ownership.
As of 26 April 1998, the total amount of salaries in arrear increased by 3.9 per cent,
amounting to UAH 5,543.9 million compared with the previous period (the end of March).
Insignificant decreases of the salaries in arrear could be observed in the budget field, in
particular: in educational institutions by 4.0 per cent, in institutions of culture by 6.4 per cent, and in
institutions of health salaries by 5.3 per cent.
Decreases of salary in arrears could be observed in enterprises operating in some fields of the
industry.  In particular: electric power by 2.1 per cent, ferrous metallurgy and machine-building by
0.8 per cent, light industry by 1.5 per cent and milling and mixed fodder industry - by 9.3 per cent.  Itshould be noted, however, that in the production field, in general, salaries in arrear continued to
increase, but at a lower pace than during the previous months.WT/ACC/UKR/55
Page 15
During January-March 1998 payments of salaries amounting to UAH 285.0 million were paid
by means of products rather then money.  This practice was used more extensively in the following
oblasts: Khmelnytskiy, Zhytomyr, Ivano-Frankivsk, Kherson, Sumy and Vinnytsya.
__________