Yelizaveta Dorontseva
Ukraine took another step toward receiving a bailout tranche from the IMF; Naftogaz called actions of Dmytro Firtash’s gas distribution firms "sabotage"; while Ukrzaliznytsia experienced a ticketing chaos – these are the main economic news of the outgoing week.
The Cabinet of Ministers at its Wednesday meeting approved the draft memorandum on economic and financial policies, as well as letters of intent of the government and the National Bank to the country's main creditor, the International Monetary Fund. Thus, the country has become closer to receiving a bailout tranche. Moreover, Ukraine has fulfilled the IMF's main requirements – the Rada passed the 2019 state budget and the president signed it into law, while gas prices for the population have been increased. Now the government is awaiting a meeting of the IMF Executive Board, set to be held in the near future, where the decision will be discussed on opening a new 14-month support program for Ukraine.
NBU Governor Yakiv Solii radiated optimism about the country's progress toward sealing a new aid deal. In an interview with Reuters, he said that Ukraine would very soon (within 10 days) receive from the IMF the new tranche of macro-financial assistance. Although the size of the tranche has not yet been disclosed, Smolii noted that the amount will allow the NBU to increase foreign exchange reserves by $1.4 billion, up to $19.2 billion. In total, the stand-by program for the period of 14 months is worth $3.9 billion.
Budget amendments
In the outgoing week, Parliament Speaker Andriy Parubiy signed the state budget bill previously adopted by the Verkhovna Rada and shortly later, President Petro Poroshenko signed the draft into law. In addition, in the outgoing week, the Verkhovna Rada made another important decision for the Ukrainians. The legislators increased the expenditures on pensions by UAH 10.778 billion, on additional payments for those working in the exclusion zone - by UAH 227.4 million, and on continued modernization of the Antarctic Station Academic Vernadsky – by UAH 27.6 million. Meanwhile, to ensure the increase in pension expenditures, the Rada cut funding of a number of other programs. In particular, social assistance payments were cut by UAH 7.2 billion, while the cost of public administration reform has been reduced by UAH 1.208 million. Another UAH 2 billion was sliced from state support for the agricultural sector.
The Verkhovna Rada also made clarifications to the Tax Code amendments. According to the head of the parliament's tax and customs policy committee, Nina Yuzhanina, several errors were found in the bill , during its processing ahead of the speaker's signing, and a legal department provided a number of comments to the draft.
“When making amendments, transfer pricing was canceled altogether, while the partially registered text should be canceled,” the head of the committee added. Yuzhanina called for a clarification that would extend a 7% reduction in VAT on medications. Also, an amendment was made to the change in the excise tax on wine production, according to which the new rate will be introduced from March 1, 2019.
Firtash's fake payments
This week, the media were also focused on Firtash's Regional Gas Company, which began sending pumped-up bills for gas to organizations and households, as well as notifying them of the fines for allegedly using for three years untested gas meters. After numerous consumer complaints to local authorities, Naftogaz said that Firtash's regional gas companies deliberately disinform consumers, also shifting any responsibility to Naftogaz. “Such actions by the regional gas distribution and sales companies have intensified in the past few weeks. This may indicate the implementation of a coordinated plan, aimed at creating artificial inconveniences for consumers, discrediting the Ukrainian gas market reform, and protecting the illegal monopoly of regional gas distribution companies,” Naftogaz said in a statement. The company said that, according to their information, the leaders of the regional gas distribution hold meetings with local communities, trying to shift responsibility for their decisions to Naftogaz.
In this regard, Naftogaz stressed that it was in no way involved in the decision of such companies to demand additional money from consumers, and condemned such actions. The corresponding costs are already compensated for to gas distribution sales companies through the mechanism of production and technological expenditures.
Also, Naftogaz noted that additional charges could lead to double payment of the same volumes of gas, creating virtual debts that in the future may prevent consumers from switching to other gas suppliers. This serious accusation was followed by another. Ukrtransgaz almost accused Firtash's Regional Gas Company of trying to launch large-scale provocations to disrupt gas supplies to consumers at the height of the heating season. “On December 3, companies affiliated with an RGC group simultaneously submitted to the Ukrtransgaz Information Platform fictitious applications for gas supply to about 100 consumers throughout Ukraine.
At the same time, these consumers had already had their nominations for December from their existing suppliers, with whom they had concluded contracts,” said Ukrtransgaz. Such actions, according to the company, were recorded in all regions of Ukraine, except Kirovohrad, Odehsa, Donetsk, and Luhansk regions. It is noted that in case of submission of supply nominations from several companies to one consumer, GTS Code says Ukrtransgaz needs to receive confirmation letters from such a consumer, which increases the processing period. The company also said that the next step of the RGC was to shut off gas consumers under the pretext of lack of nominations. Given the large-scale attempt to destabilize the natural gas market, Ukrtransgaz turned to NKREKU, the Antimonopoly Committee, law enforcement agencies, and the SBU with a request to take all necessary steps to bring the organizers and perpetrators of the wrongful manipulation to justice. “After all, such illegal actions at the height of the heating period, and especially in the regions where martial law is imposed, could cause disastrous consequences for the country,” the company stressed.
Prime Minister Volodymyr Groysman also addressed the issue. “I have prepared an instruction and will appeal to the Minister of Energy [Ihor Nasalik] and to the National Commission [on Energy and Utilities Regulation], which is independent, but has the authority to monitor and verify. They [regional gas distribution companies] need to be smacked hard. These monopolies simply sit on our necks.
They have to pay huge fines for this if they do this to people,” the prime minister told parliament. Groysman also urged the households to pay only for the gas actually consumed, at a rate of no more than UAH 8.55 per cubic meter, since everything else "is a scam on the part of gas suppliers." According to the government head, during the next week's Cabinet meeting, a special commission will be set up for the global inspection of regional gas companies. The icing on the cake of the protracted conflict between the households and regional gas companies was the decision of the Supreme Court that installing gas meters is the responsibility of the regional gas distribution companies, not consumers, because their cost has already been laid in gas tariffs.
Ticket chaos and Boryspil Airport shuttle railbus failure
Thousands of Ukrzaliznytsia clients experienced a real shock this week. As they purchased train tickets online, the system withdrew their money but never provided actual e-tickets. “In connection with a six-fold increase of the load on the online ticket sales on booking.uz.gov.ua, Ukrzaliznytsia is taking measures to ensure smooth operation of the service, including payment receipts. To stabilize the system, a limit of 140 sessions per second has been imposed, which is necessary to ensure the implementation of client payment transactions,” the company’s press service later explained.
But it was not until the next day that the Ukrzaliznytsa online systems could be restored, and, according to the company's press service, all of the affected customers were able to get their tickets, or get a full refund. Another railway failure this week was related to the newly-opened "Boryspil Express" railbus line connecting Kyiv and the country's major Boryspil Airport.
For the second time since the launch, the railbus broke down mid-route. The press service of the company declined to comment on the incident. The fact that the railbus broke down near Darnytsia subway station became known due to a Facebook posting by one of the passengers. The engine of the train was successfully repaired, but it took an auxiliary locomotive to get the railbus to the airport. According to reports of outraged passengers, the half-hour delay could easily make them miss their flights. The logical question here is how Ukrzaliznytsia intends to restore people's confidence in the new Express line...
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