Main weekly events from Infobank News Agency
| 14 September 1998 | 24 |
IMF APPROVES US$ 2.2 BILLION EFF CREDIT TO UKRAINE
NATIONAL BANK RESTRICTS CURRENCY EXCHANGE BY NATURAL ENTITY TO US$ 1,000
LAWMAKERS APPROVE PRESIDENTIAL BILL ON SIMPLIFIED TAXATION FOR SMALL BUSINESSES
NBU INTRODUCES MANDATORY SALE OF 75% OF CURRENCY RECEIPTS, ALLOWS OPERATIONS WITH HARD CURRENCIES AT CURRENCY EXCHNAGE ONLY
KYIV. Beginning with September 7, Ukrainian banks will have to sell at
the Ukrainian Inter-banking Currency Exchange (UICE) 75% of the money
paid into the accounts of resident clients in foreign currencies. The
sale must be carried out without clients' order. 25% of currency
receipts will be left in clients' accounts.
Such requirements have been set in the telegram issued by the National
Bank of Ukraine. According to the same telegram signed by Volodymyr
Stelmakh, NBU Board Deputy Chairman, the sale/purchasing by written
order of currencies belonging to group # 1 in NBU's classification
(U.S. dollar, German mark, British pound and other hard currencies)
can be carried out only at the Ukrainian Inter-banking and Crimean
Inter-banking currency exchanges. The telegram explains that these
requirements are being set to fulfill NBU's regulation of September 4.
IMF APPROVES US$ 2.2 BILLION EFF CREDIT TO UKRAINE
WASHINGTON. IMF board of directors took a decision to open the
extended fund facility (EFF) credit to Ukraine to reform its economy
and protect the country's currency from the impact of the financial
crisis in Russia and Asia. The credit worth US$ 2.2 billion is
extended for three years. The first US$ 257-million tranche is to be
released at once. The release of the remainder of the credit will
depend on how effective the efforts of the Ukrainian leaders will be
in implementing free-market reforms.
To get the whole credit, Ukraine must implement the rigid program of
economic reforms and balance of payments reduction. The main goals of
the reforms include cutting the government apparat, progress in the
privatization and deregulation of the economy, reforms in the energy
sector and farming. In line with the program, GDP growth in 2001 must
be 4 percent, with a 7-percent inflation rate against the 10-percent
rate in 1997. In 1998, the budget deficit must not exceed 2.8 percent
of GDP and 1 percent of GDP in 1999.
The IMF statement issued in the aftermath of the decision says that
despite the financial injection Ukraine's currency is still in danger
zone. Within nearest time Ukraine will remain in the area of
unpredictable market fluctuations which can jeopardize budget
discipline and resume pressure on the Hryvnya exchange rate and its
reserves, forecast the IMF experts.
The IMF credit was to have been unlocked late August, but the decision
was postponed pending the study of the impact of the financial slump
in Russia on Ukraine. Ukraine has been seeking the EFF credit for
quite a long time. All earlier attempts to get it failed because of,
as the IMF believes, unsatisfactory pace of economic reforms. For much
the same reasons, the IMF stopped the disbursement to Ukraine of a US$
542 million Stand by credit. The IMF positive decision may trigger the
World Bank into opening its two iced credits worth US$ 600 million.
NATIONAL BANK RESTRICTS CURRENCY EXCHANGE BY NATURAL ENTITY TO US$
1,000
KYIV. The National bank has prohibited currency exchange counters to
sell more then the equivalent of US$ 1,000 in cash to natural
entities.
In foreign currency exchange operations in cash, the rate of hryvnya
must not deviate from the official rate fixed by the National Bank by
more than 5 per cent including commission.
In operations with the Russian and Byelorussian roubles carried out by
authorized banks and credit/financial establishments, the actual
selling/buying rate must be used without margin restriction or maximum
deviation from the official rate.
The National Bank reminds commercial banks that the funds in foreign
currencies that were in bank clients' current accounts as of September
7, 1998, are not subject to mandatory sale. As Infobank has reported
earlier, the National Bank obligated commercial banks to sell,
beginning with September 7, 75 per cent of hard currency placed in the
accounts of residents.
LAWMAKERS APPROVE PRESIDENTIAL BILL ON SIMPLIFIED TAXATION FOR SMALL
BUSINESSES
KYIV. On September 9, Ukraine's parliament passed the first reading of
the bill on the simplified taxation, accounting and records for small
businesses, with 239 deputies out of the present 332 supporting the
bill. Following final approval by parliament, small businesses will be
exempt from a multitude of taxes. A single tax to be introduced will
amount to 6 percent from sales for legal persons and from UAH 20 to
200 a year for individual businessmen.
The bill was submitted by President Kuchma to parliament
simultaneously with a similar decree of July 3, 1998. Both the bill
and the decree propose to start single tax practices as of January 1,
1999.
The bill will be binding for legal persons, provided the average
number of employees during the year does not exceed 10 persons and
sales are under UAH 250,000; and for natural persons, provided the
number of employees, family members including, does not exceed 10
persons and sales do not exceed UAH 250,000.
Both natural and legal persons will have the option of switching to
single tax or remaining regular payers of taxes. Single tax for
natural persons is to be fixed by local authorities. Legal persons
which prefer to pay a single tax of 6 percent are not exempt from VAT.
Natural persons will have to pay both VAT and income tax.
Records will also be simplified. At present, small businesses must
make monthly reports to tax administration whereas the bill imposes
3-monthly reports which will allow small businesses to retain cash
flow during the quarter.
UKRAINIAN-MADE "ZENITH-2" BOOSTER ROCKET WITH 12 U.S. SATELLITES ON
BOARD FAILED SOON AFTER LAUNCHING FROM BAIKONUR SPACE CENTER
BAIKONUR (KAZAKHSTAN). On Sept. 10, at 0.30 local time, 4 and a half
minutes after take-off from the Baikonur space center in Kazakhstan
the Ukrainian-made Zenith-2 booster rocket with 12 American satellites
on board failed. The launch was part of the international Global Star
program and whose aim is to put commercial communications satellites
into orbit around the Earth.
The launch is the first in a series of three launchings involving
Zenith-2 carriers. The causes of the accident are being investigated.
The carrier rocket control system received an erroneous command which
stopped its engines and the carrier fell on the Earth, said Russian
space agency press secretary Vyacheslav Mikhajlichenko in his
interview to Reuters.
Global Star project total cost amounts to US$ 2.6 billion. The
international consortium for the project is headed by the American
Loral Space Co. The consortium also includes the American Qualcomm
Inc., Air Touch Communications Inc., Elsacom, the French Alcatel and
France Telecom, the German Daimler Benz Aerospace, the British
Vodafone Group, the Italian Alenia and the Korean Hyundai.
"MOODY'S" RATING AGENCY LOWERS UKRAINE'S CREDIT RATING
NEW-YORK. On Sept.10, the investment service of the Moody's rating
agency announced lower ratings for the Ukrainian foreign currency
foreign loan bonds and other debt commitments from level B2 to B3, and
for banks foreign currency deposits from B3 to Caa3. Simultaneously,
all Eurobonds issued by the Ukrainian government were lowered from B2
to B3.
Decrease in Ukraine's foreign currency reserves to dangerously low
level (below US$ 800 million early September) increases the risks that
the government may not meet its commitments on foreign loans, Moody's
press release stresses. This fact coupled with the internal and
expernal pressure on the Ukrainian currency forced the government and
the National Bank to resort to a voluntary conversion of domestic loan
T-bills for non-residents and to expand the Hryvnya's currency band to
UAH 2.5 - 3.5 for US$ 1. These factors failed to reduce the
speculation since the yield on T-bills on secondary markets topped 200
percent.
According to Moody's, the impact of a financial crisis in Russia on
the Hryvnya is only partial as the main reason for the devaluation
lies in the weakness of the economy and the inability of the present
and the former governments to implement effective economic reforms.
The Russian crisis is, however, likely to slightly affect Ukraine's
export potential and step up economic stagnation. The only positive
development for Ukraine, Moody's believe, is the unlocking of the EFF
credit by the IMF. Yet, according to Moody's, the need of Ukraine in
foreign currency in 1999 will exceed US$ 2 billion.
GOVERNMENT, NATIONAL BANK TAKE ANTI-CRISIS MEASURES
KYIV. On September 10, the Cabinet of Ministers along with the
National Bank of Ukraine approved a list of the anti-crisis measures
aimed to bring about financial stabilization. Among them is a
temporary cancellation of the governmental regulation on the list of
goods and services whose export by barter is prohibited. This change,
however, applies to Ukraine's export to the C.I.S. only.
The National Bank is to organize starting with September 12 the sale
of foreign cash at Ukrainian inter-banking currency exchange auctions
and in cooperation with Government approve the list of goods for which
the term of export currency returns will not be prolonged. Ukraine's
Foreign Trade Ministry is to simplify the procedure of registration of
foreign trade contracts for the companies with a high reputation and
also reduce the list of indicative prices of export goods.
In September Parliament is expected to approve the law on the
abolition of indicative prices and duty on the export of cattle and
its leather, and abolish the income tax on advance payments or
pre-payment under export contracts.
The State Committee for Securities and Stock Market is to make a
decision regarding the expediency of fixing price limits on the
securities that are offered for sale at exchanges and in the
over-the-counter stock trade system. The same committee is to prohibit
all legal or natural entities to sign agreements for securities if
such agreements involve the securities that have not been placed in
line with existing laws.
Besides that, the list of anti-crisis measures also includes a number
of measures that have been enacted in the country already, such as the
new limits of currency band, the introduction of a 5 per cent margin
on the sale of foreign currencies in currency exchange counters, the
suspension of operations at the inter-banking currency market, a
madatory sale at the exchange of 75 per cent of receipts from
residents, etc.
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