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14 September 1998 24

NBU INTRODUCES MANDATORY SALE OF 75% OF CURRENCY RECEIPTS, ALLOWS OPERATIONS WITH HARD CURRENCIES AT CURRENCY EXCHNAGE ONLY

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

UKRAINIAN-MADE "ZENITH-2" BOOSTER ROCKET WITH 12 U.S. SATELLITES ON BOARD FAILED SOON AFTER LAUNCHING FROM BAIKONUR SPACE CENTER

"MOODY'S" RATING AGENCY LOWERS UKRAINE'S CREDIT RATING

GOVERNMENT, NATIONAL BANK TAKE ANTI-CRISIS MEASURES
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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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