**UKRAINIANECONOMIC AND FINANCIAL DEVELOPMENTS**

**FOR THEWEEK ENDING JANUARY 14.**

** **

20 JANUARY2000

SOURCE: USEMBASSY KIEV

 

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SUMMARY

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1. THIS CABLESUMMARIZES UKRAINIAN ECONOMIC AND

FINANCIALDEVELOPMENTS WRITTEN ABOUT IN THE PRESS

DURING THE WEEKENDING JANUARY 14.  PARLIAMENT

POSTPONED THESECOND READING OF THE 2000 BUDGET LAW.

DURING 1999,THE OFFICIAL EXCHANGE RATE CHANGED BY

52.2 PERCENT,THE MONETARY BASE INCREASED BY 39

PERCENT, ANDTHE MONEY SUPPLY INCREASED BY MORE THAN

40 PERCENT.REAL GDP DECREASED BY LESS THAN ONE-HALF

PERCENT IN1999.  THE NBU SOLD THREE MILLIONDOLLARS

ON THEFOREIGN CURRENCY MARKET. PRESIDENT KUCHMA ASKED

THATPARLIAMENT APPOINT STELMAKH AS NBU GOVERNOR.  THE

NBU CLARIFIEDITS CURRENCY POLICY.  AVERAGE FLOUR

PRICES ROSE16-20 PERCENT SINCE DECEMBER.  END

SUMMARY.

 

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PARLIAMENTPOSTPONED SECOND READING OF 2000 BUDGET LAW

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2. PARLIAMENTPOSTPONED ITS SECOND READING OF THE 2000

BUDGET LAW --PREVIOUSLY SCHEDULED FOR JANUARY 13 --

UNTILFEBRUARY 1.  BECAUSE PARLIAMENTCANNOT REJECT

THE BUDGETOUTRIGHT AT THIS POINT, THE DEPUTIES

REFUSED TOCONSIDER THE DRAFT SUBMITTED BY THE

GOVERNMENTJANUARY 6 AND SENT IT BACK FOR IMPROVEMENT.

PARLIAMENTARIANSWERE REPORTEDLY ANGRY THAT THE SECOND

DRAFTDIFFERED CONSIDERABLY FROM THE DRAFT TO WHICH

THEY HADGIVEN A FIRST READING (THE NEW DRAFT WAS

REPORTEDLYMUCH TOUGHER).  IN PARTICULAR, THE

GOVERNMENT'SDRAFT SUGGESTED A DISTRIBUTION OF FUNDS

BETWEEN LOCALAND CENTRAL BUDGETS OF 27-75 PERCENT,

COMPARED WITH41-59 PERCENT DISTRIBUTION SUGGESTED BY

PARLIAMENT.

 

3. ON JANUARY14, PARLIAMENT WAS ONE VOTE SHORT OF

OVERRIDINGTHE PRESIDENT'S VETO OF THE EMERGENCY

BUDGET LAWTHAT WOULD HAVE PROVIDED FUNDING UNTIL THE

2000 BUDGETWAS ADOPTED.  THE PRESIDENT HADRETURNED

THELEGISLATION TO PARLIAMENT WITH HIS SUGGESTION THAT

IT DELETE THEPROVISION PROHIBITING BUDGET MONEY FROM

BEING USED TOHOLD A REFERENDUM UNTIL AFTER PARLIAMENT

ADOPTED THE2000 BUDGET.

 

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1999MACROECONOMIC INDICES

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BUDGETIMPLEMENTATION

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4. ACCORDINGTO FINANCE MINISTER MITYUKOV, TOTAL

REVENUESCOLLECTED BY THE STATE BUDGET LAST YEAR

TOTALED UAH18.8 BILLION -- UAH 4.7 BILLION OR ABOUT

20 PERCENTSHORT OF ITS TARGET FIGURE.  LOCALBUDGETS

RECEIVED UAH12.6 BILLION -- UAH 1.9 BILLION OR 17

PERCENT MORETHAN WAS PLANNED FOR 1999. ACCORDING TO

A STATE TAXADMINISTRATION REPORT, TAX BODIES

COLLECTED UAH25.9 BILLION FOR THE CONSOLIDATED (LOCAL

AND STATE)BUDGET (102.6 PERCENT OF THE TARGET FOR THE

YEAR),INCLUDING UAH 14.5 BILLION FOR THE STATE BUDGET

ALONE (94.8PERCENT OF THE TARGET).

 

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MONETARYINDICES

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5. INDECEMBER, THE MONETARY BASE INCREASED BY UAH 320

MILLION OR2.7 PERCENT TO TOTAL ABOUT UAH 11.98

BILLION.  DURING THE SAME PERIOD, THE MONEYSUPPLY

INCREASED BYABOUT UAH 1.03 BILLION OR 4.9 PERCENT TO

TOTAL UAH22.07 BILLION.  DURING 1999, THEMONETARY

BASEINCREASED BY UAH 3.37 BILLION OR 39.2 PERCENT AND

THE MONEYSUPPLY GREW BY UAH 6.36 BILLION OR 40.5

PERCENT.  THE OFFICIAL HRYVNIA/DOLLAR EXCHANGERATE

CHANGED BY52.2 PERCENT DURING 1999. INFLATION IN

1999 WAS ONLYSLIGHTLY MORE THAN 19 PERCENT,

INDICATINGTHAT MUCH OF THE MONETARY GROWTH WAS

CHANNELEDINTO THE FOREIGN EXCHANGE MARKET.

 

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1999 REAL GDPDECREASED BY LESS THAN ONE-HALF PERCENT

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6. ACCORDINGTO PRELIMINARY ESTIMATES BY THE STATE

STATISTICSCOMMITTEE, REAL GDP IN 1999 AMOUNTED TO

99.6 PERCENTOF ITS 1998 FIGURE.  LAST YEAR, GDP

DECREASED BY0.4 PERCENT, THE BEST RESULT SINCE

INDEPENDENCE.  GDP DECREASED BY 1.7 PERCENT IN 1998,

BY 3.2PERCENT IN 1997 AND BY 10 PERCENT IN 1996.

 

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NBU SELLSTHREE MILLION DOLLARS ON CURRENCY MARKET

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7. FOR THEFIRST TIME IN TEN MONTHS, THE NATIONAL BANK

OF UKRAINE(NBU) ON JANUARY 10 SOLD U.S. DOLLARS ON

THE INTERBANKFOREIGN CURRENCY MARKET.  THE NBUSOLD

MORE THANTHREE MILLION DOLLARS, SERHI YAREMENKO, THE

DIRECTOR OFTHE NBU'S FOREIGN CURRENCY DEPARTMENT

ANNOUNCED.  YAREMENKO SAID THAT THE BANK DOES NOTPLAN

TO SUPPORTTHE HRYVNIA RATE WITH ADDITIONAL SALES.

LAST YEAR,THE NBU PURCHASED FOREIGN CURRENCY WORTH

USD 700MILLION.  THE BANK HELD USD 1.051BILLION IN

FOREIGNCURRENCY RESERVES AS OF THE LAST WEEK OF

DECEMBER.

 

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PARLIAMENT TOVOTE ON APPOINTMENT OF NBU GOVERNOR

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8. ON JANUARY13, PRESIDENT KUCHMA OFFICIALLY PROPOSED

THATPARLIAMENT APPOINT VOLODYMYR STELMAKH TO THE POST

OF NBUGOVERNOR.  THE VOTE ON HISAPPOINTMENT WAS

SCHEDULED FORJANUARY 20.  AFTER FORMER NBUGOVERNOR

YUSHCHENKOTOOK THE POST OF THE PRIME MINISTER ON

DECEMBER 22,STELMAKH PERFORMED THE DUTIES OF ACTING

NBUGOVERNOR.  STELMAKH PARTICIPATED INTHE NBU BOARD

SINCE 1993,AND WAS IN CHARGE OF MONETARY POLICY,

CURRENCYREGULATION AND CONTROL.

 

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CURRENCYPOLICY TO BE SET BASED ON THE 2000 BUDGET

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9. ON JANUARY14, NBU PRESS SECRETARY RICKBERG REFUTED

RECENT PRESSREPORTS THAT THE NBU HAD INTRODUCED A

FLOATINGEXCHANGE RATE.  RICKBERG SAID THATTHE

FOREIGNCURRENCY POLICY FOR THE CURRENT YEAR WOULD BE

ANNOUNCEDONLY AFTER THE ADOPTION OF THE 2000 STATE

BUDGET.  THE GOVERNMENT HAD NOT YET INVALIDATEDTHE

CURRENCY BANDOF UAH 3.4 - 4.6 PER ONE USD SET IN

FEBRUARY1999, AND SURPASSED IN NOVEMBER. THE NBU HAS

MAINTAINEDTHE FOREIGN CURRENCY BAND POLICY SINCE

1997.

 

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AVERAGE FLOURPRICES UP 16-20 PERCENT SINCE DECEMBER

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10. ACCORDINGTO MEDIA REPORTS, FLOUR PRICES INCREASED

AN AVERAGE OF16-20 PERCENT ACROSS THE COUNTRY IN

DECEMBER ANDJANUARY.  PRICES FOR BAKERYPRODUCTS

INCREASED BY10-15 PERCENT IN ODESSA, 20-40 PERCENT IN

KHARKIV AND40-50 PERCENT IN LVIV OBLASTS SINCE THE

NEWCROP.  AG EXPERTS ATTRIBUTED THEPROBLEM TO

UNEQUALDISTRIBUTION OF GRAIN STOCKS, WORSENED BY GOU

REGULATION OFBREAD PRICES AND BAKERIES' PROFIT

MARGINS.  PRICES WERE EXPECTED TO STABILIZE IN

FEBRUARY,HOWEVER, WHEN FARMERS STARTED SELLING GRAIN

TO PURCHASEAGRICULTURAL INPUTS.

 

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EXCHANGERATES

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11.HRYVNIA/DOLLAR EXCHANGE RATES WERE AS FOLLOWS:

 

                 01/09  01/10  01/11  01/12  01/13

                -----------------------------------

OFFICIALRATE    5.21945.21945.2431 5.3504 5.3600

INTERBANKRATE  HOLIDAY5.5360 5.5375 5.44715.4389

KIEV CASHRATE   5.5333 5.3336 5.56035.5948 5.5836

MOSCOW CASHRATE  --    5.5580 5.6420 5.5700  --

 

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MAIN STOCKINDICES

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12. RESULTSOF UKRAINE'S MAIN STOCK INDICES FOR THE

WEEK WERE ASFOLLOWS (AS OF JANUARY 13):

 

                   WEEKLY CHANGE, PCT

INDEX          POINTS    IN UAH    IN USD

-----          ------    ------    ------

WOOD-15       1070      7.66     5.93

PFTS          40.71     7.38     N/A

 

 

13. KEYINTEREST RATES FOR THE WEEK WERE AS FOLLOWS

(AS OFJANUARY 1

3, 1999):

 

NBU DISCOUNTRATE:  45 PCT (SINCE 24 MAY 1999)

NBU LOMBARDRATE:   50 PCT (SINCE 24 MAY1999)

 

KIEVINTERBANK     AVG. ANNUAL   CHANGEFROM

   RATES              PCT      LAST WEEK,PCT

--------------     -----------  -------------

  ONE-DAY             12.7          -130.8

  SEVEN-DAY           32.2           -94.1

  14-DAY              46.6           -73.4

  30-DAY              66.2           -41.3

  60-DAY              77.5          -32.5

  90-DAY              80.0           -30.0