Anders Aslund says Ukrainian economy is in good shape – KyivPost

WASHINGTON – Swedish economist Anders Aslund told a busy meeting of the U.S.-Ukrainian Business Council on Feb. 5 that Ukraine’s economy is in “very good shape,” but lamented that too few people know the good news.

Aslund said the budget deficit has now been reduced to 2% of gross domestic product, public debt has fallen from 80% of GDP in 2016 to 52% and inflation has fallen to around 5%. He expects further progress in 2020.

Only last June, he noted, interest rates were at 18% and they are now at 11%. Aslund predicts that “the interest rate will fall to eight or seven very soon” while the National Bank of Ukraine predicted last October that the rate would only fall to this level towards the end of 2021.

Aslund said the better-than-expected forecast means “there has been a sea change…and if you have an interest rate of 8%, then you’ll probably have commercial loans at 11%. And with an inflation rate of four percent, that’s a real rate of seven percent.

Morgan Williams, president and CEO of the 200-member trade association to which the Kyiv Post belongs, welcomed the prediction, saying Ukrainian businessmen had often complained to him that they had to to borrow at rates of 22-24% and that they operated successfully with that kind of load was extremely difficult.

Aslund paid tribute to the government of former Ukrainian President Petro Poroshenko for laying the foundations in 2016-2019 for promising economic prospects. He stressed the importance of creating a land market and hoped Parliament would this week pass the proposed measures to finally allow private ownership of farmland. Ownership of the land, he said, would open up development funds using the land as collateral allowing for loans. He said: “The standard Ukrainian view is that the oligarchs will buy all the land. But the fact is that the oligarchs don’t have a lot of money, nor are they interested in buying all that land.

He said government proposals limit the amount of land a person can buy to 10,000 hectares of land. He doesn’t think a ban on foreigners entering the market would be a disadvantage because, he said, 100 foreign companies have already invested in Ukraine’s agricultural sector and that’s probably enough for now.

He said a key measure of whether Ukraine keeps moving forward will be how the government tackles the country’s law enforcement cleanup. He said that to ensure investor and business confidence, Ukraine needs to reform all law enforcement and designated the Ukrainian Security Service, known as the SBU, and the Customs Service.

Aslund thinks it is problematic that 60% of banking operations are in the hands of the state and that there are currently only two major private bankers.

He also said that although there are many reform-minded people in Ukraine, no one really stands out as a champion of reform. He said Economy Minister Timofiy Mylovanov probably best fits that description right now.

Aslund praised Ukrainian President Volodymyr Zelensky and his government, but blamed him for giving in to attacks on ministers’ high salaries.

“Either you have professional ministers working for their salary or they are paid some other way,” Aslund said with the clear implication that “another way” led to corruption. “The argument that we should cap ministers’ salaries is harmful,” he said.

As the conference took place on the same day that the US Senate decided the fate of President Donald Trump in his impeachment trial, it seemed inevitable that those attending the meeting would wonder how the bitterly divisive proceedings, with Ukraine in their epicenter, would affect the Ukrainian economy. and its relations with America.

Three former US ambassadors, John Herbst and William Taylor, who served in Kyiv, and Daniel Fried, were among those attending the meeting. All are strong supporters of Ukraine and believe that American sentiment among officials and politicians remains firmly behind Kyiv.

Above all, despite the distortions about Ukraine and the many tirades about corruption in the country, during the impeachment process that began last September, there was still overwhelming support among both American political parties for Ukraine, they said.

Taylor was the charge d’affaires, the top US diplomat, in Kyiv when he was called to testify before the congressional impeachment inquiry last November. Taylor won admiration for his courage by defying Trump’s orders for administration officials to ignore demands and subpoenas at the inquiry. His overwhelming evidence left little doubt that Trump had tried to force the Kyiv government to launch a bogus investigation into former Vice President Joe Biden. Taylor resigned from his post in January. The embassy is now headed by Chargé d’Affaires Kristina Kvien, but Washington has yet to announce a new permanent ambassador.

When Taylor walked into the conference room just before the meeting started, the others in attendance burst into spontaneous applause. A surprised Taylor smiled at the congregation and made them laugh, asking, “What happened?”

Taylor spoke in a question-and-answer session following Aslund’s speech. He predicted that Stephen Biegun, experienced businessman and diplomat, who was appointed new U.S. Under Secretary of State in December would be good news for Ukraine.

Fried said a prosperous Ukrainian economy would be “a strategic disaster for [Russian dictator Vladimir] Putin and Putinism,” because Russians would wonder why their economy was in decline. Seeking the answer, Fried said, would expose the kleptocracy at the heart of the Kremlin and jeopardize Putin’s continued grip on power.

Fried said Putin would only give up trying to undermine Ukraine if the cost to Moscow, in terms of sanctions and other penalties imposed by the United States and other powers, increased enough.

Aslund said there was already growing dissatisfaction with Putin because since the Russian invasion of Ukraine in 2014 average monthly salaries in Ukraine had risen from $200 to $450, while in Russia, they went from 800 to 700 dollars. He said: “Putin has exhausted his [economic] arsenal.”

However, some participants in the meeting believed that Putin would stop at nothing to prevent Ukraine from making economic progress. Victor Rud, a prominent Ukrainian-American activist and board member of the Ukrainian American Bar Association, said it was highly unlikely that Putin would stay on the sidelines as Ukraine headed down an economic trajectory. and politics that would jeopardize his reign. “Between now and anytime, Putin is not just going to drink hot beer and eat cold pizza. There must be initiatives on his part that will prevent or reverse things in Ukraine. no choice but to do so,” warned Rud.

Fried did not rule out that Putin might consider significantly increasing military force against Ukraine. But he said the Kremlin already had to hide how many Russian soldiers died in the war Putin started six years ago. Big improvements in Ukraine’s military capabilities over the past five years make the option of war “narrow and dark” for Putin.

Christi C. Elwood