Parliament passed a historic law on the launch of the land market from July 2021 and was replaced by the head of Finance, and the Cabinet of Ministers adopted a decision to index pensions in may and promised to consider easing quarantine to support the economy are the key economic news this week.
This week was marked by truly epochal event. Parliamentarians at a special meeting, not fearing the danger of Contracting the insidious coronavirus in the session hall of the Verkhovna Rada finally adopted the law on turnover of lands of agricultural purpose according to which from 1 July 2021 start the land market.
This market in Ukraine was not the last hundred years, and since 2001 the Parliament under pressure from populists and agrarian lobbyists has annually extended the moratorium on the purchase and sale of agricultural land.
Over the last two decades it was possible to prepare and start the land market. But the deputies of previous convocations were clearly not interested in resolving the issue. They speculated on the fact that you can’t commit “blasphemy” in the form of sales of Ukrainian land.
Over the years, was born countless horror stories of which intimidated the people in exchange for support at the next election.
At the same time, in Ukraine, well functioning informal land market: anyone with the money through various schemes can become the owner of the coveted pie.
And in penultimate day of March 2020 Parliament has completed a months-long Saga for the consideration of the bill. A number of parliamentarians from the camp of the opponents of the market are in no hurry to admit defeat – registered resolution on the abolition of the final vote on the bill. Therefore, the document cannot be submitted for the signature of the President, as Parliament will not reject these draft regulations.
Because of national quarantine deputies throughout April plan to work in the committees and not to hold plenary meetings, therefore, the entry into force of the law may be delayed. If only President Vladimir Zelensky will not decide to convene an extraordinary session to quickly put an end to land reform.
Analyzing the adopted law, it should be noted that it differs from the liberal version, which was developed sent in early March in the resignation of the Cabinet of Alexey Goncharuk.
For example, the land market in Ukraine will work from 1 July 2021, instead of 1 October 2020 as originally expected.
The reform itself will be carried out in two stages. On the ground – the right of ownership of land will be able to only natural persons are citizens of Ukraine. They will be limited to one hundred hectares in one hand. The second phase of reforms will start from 1 January 2024. Then this right will be granted to a legal entity, but for them the limit will be ten thousand hectares.
The law prohibits the sale of land to foreigners, the companies that belong to the citizens of Russia, legal entities with foreign shareholders and legal entities, the beneficiaries of which it is impossible to establish, or the beneficiaries of which are registered in offshore zones, as well as persons against whom there are sanctions.
Also prohibits the sale of municipal and state lands. That is, will sell shares in private ownership. Also excluded sites located in the temporarily occupied territory: they can only be inherited.
It is obvious that the adoption of the law in this abridged version greatly reduces the potential inflow of investments from foreign companies. However, it can in some way be called a compromise, because the Ukrainians still ambiguous attitude to this reform. In addition, the state has more than three years to develop mechanisms for the sale of land to legal entities.
Anyway, this is much better than a complete ban on the sale of land, which remained only in “advanced” countries like North Korea, Tajikistan, Venezuela, Cuba and the Congo.
With their backs against the wall
Speaking about the launch of the land market, it is important to note that the deputies took the law in an emergency procedure is not a good life.
Land reform is one of the two key conditions of the International monetary Fund, under which Ukraine will be able to count on a new cooperation program with its main creditor.
The second condition is the adoption of the law on banking regulation, which the deputies at the same historic session adopted in first reading.
Before considering these documents, the President Zelensky addressed the MPs and said that Ukraine in the current conditions without the IMF money will not last long.
“For us it is very important that the signing of the Memorandum with the International monetary Fund. And you know perfectly well that two main conditions – that the land law and banking law… it is important to support our economy, it is vital that the blood to our economy,” he said from the rostrum of the Parliament.
The head of state echoed the Prime Minister Denis Shmyhal, according to which our country this year have to pay about $ 9 billion for external and domestic obligations. However, because of the coronavirus pandemic and the global financial crisis, the government is forced to spend budget resources primarily to protect the health and lives of Ukrainian citizens. And to pay off debt no money. Therefore, without the help of the IMF and other creditors, Ukraine will default.
“Without the support of international financial institutions in order to repay external and domestic debt, we will just have to fall into the abyss of financial default. This is a very scary scenario for our country, so we certainly don’t want it and do not anticipate such a development,” – said the Prime Minister.
After the meeting of Parliament, the experts agreed that the IMF may soon take a positive decision on a new program of cooperation with Ukraine.
Executive Director of the Center for economic strategy Hlib Vyshlinsky expects real funding could begin in late April.
“Most likely, we’re going to a program with the IMF, which could realistically start; the first money we can get, even at the end of April. Accordingly, this means that we can pass in the baseline scenario without default,” – said the expert.
The head of the government at a closed meeting with business representatives noted that Ukraine has already received a “positive signal” from the IMF and the world Bank, so he expects to start funding in the near future.
The head of the parliamentary Committee on Finance, tax and customs policy Daniel Getmantsev expects that immediately after the final adoption of the law on banking regulation Ukraine could receive first tranche of IMF loan in the amount of about $ 4 billion.
The change of the head of the Ministry of Finance and the indexation of pensions
The epidemic of the coronavirus that triggered the global economic crisis hurt the economy of Ukraine. According to the Treasury, the state budget for January-March 2020 received 210,7 billion hryvnia income 27.6 billion, or 11.6 percent below the planned target.
And if the plan for taxes and levies in the first quarter was exceeded by 200 million-the value of work of customs have not been very successful. In March, the service has a shortfall of 5.5 billion USD. In January and February, customs officers short of fulfilling the plan by 13 billion hryvnia.
Given the problems with filling the Treasury, the government decided to significantly cut the budget revenues and expenditure to redraw. However, the MPs proposed option was clearly not to your taste, because they this week failed to vote on the budget changes by sending the document back for revision.
In preparing the initial version of the sequester, there was serious conflict between the Prime Minister and Minister of Finance Igor Umansky, appointed March 4. Moreover, the Finance Minister sent Shmyhalou submission on the dismissal of the heads of customs and tax services – Maxim Nefedov and Sergei Villanova.
It’s unclear what happened between them, but in the end, at the suggestion of the Cabinet, Rada at an extraordinary meeting unexpectedly laid off worked only three weeks in office, Uman, appointing in his place a young economist with experience in government agencies, Sergei Marchenko.
By the way, the Prime Minister promised next week to prepare such draft amendments to the state budget for 2020, which the deputies will approve for sure. And the “updated” estimates of the country is extremely necessary for the government not only to effectively combat the coronavirus and its implications, but also for the solution of acute social problems.
The fact that this week the Cabinet adopted a number of social solutions to support pensioners.
So, from 1 April sets monthly payout of up to 500 hryvnias to pensioners over 80 years, whose pension does not exceed UAH 9205. In addition, be paid a lump sum of 1000 hryvnias to pensioners, the pension which does not exceed 5,000 hryvnias, and also to some vulnerable categories of persons.
Moreover, the Cabinet adopted a decision on indexation of pensions to Ukrainians in may by 11 percent. And although the average size of the increase will be about 260 USD, but given the number of retirees, this will result in huge amount.
“Initiatives require changes in the budget which we are now finalizing together with people’s deputies. Pensioners and little protected person primarily in need of assistance. So expect next week’s budget support by the Verkhovna Rada in order to start paying one-time assistance in April,” – said the Prime Minister.
Rescue the flagging economy
Even in the case of a loan from the IMF and the operational budget sequester, headache to power is clearly not diminish.
Due to quarantine since March 12, actually frozen most of the work of the economy. It will last at least until April 24. Downtime leads to a shortfall of taxes and duties, it has also become a serious test for Ukrainians. The lack of work and, accordingly, the wages of a significant part of the population can lead to a serious crisis for the authorities.
Data obtained Ukrainian analytical company Research & Branding Group, saying that almost half of Ukrainians (40 per cent) have no financial savings for the period of quarantine. Only 13 percent of respondents have money, which will last for a few weeks, 17 per cent have the funds for one month of quarantine. In addition, 68 percent of respondents did inventory for the period of quarantine restrictions. 36 percent of Ukrainians expressed confidence that the quarantine will significantly worsen their financial situation, and only 19 percent believe that there is nothing in financial terms for them will not change.
Economists pointed out that Ukraine for combating coronavirus has gone the way of the rich countries, after suspending work a significant part of the economy. It may not last long, because the overwhelming majority of Ukrainians do not have such savings to not work for several months. Therefore, a necessity is at least a partial run of the economy.
And this week Prime Minister began increasingly to talk about the fact that the Cabinet is considering to significantly mitigate quarantine measures.
“We are very aware that for many people, the majority of the population of Ukraine has no financial cushion. People have to make money, the economy needs to run. Ukraine is not that rich country that can afford six months to not work and just sit at home and watch TV,” – said the head of government.
According to him, developed several scenarios of release from quarantine. Everything will depend on how the country will host the Easter holidays. It was at this period, many experts predict a surge in the incidence. If the dynamics of the disease is positive, then at the end of April, the government will be able to begin a gradual easing of the quarantine measures in the economy.
“This process will occur in several stages. First – go to work people of working age, will be parallel to the partially restored public transport. This will allow us in early may to start “restart the economy”, – said Smigel.
The Premier added that the gradual launch of the economy does not mean that there will be tightened other quarantine measures.
It is remarkable that this week the Ministry of health has allowed work the grocery markets, provided they comply with some conditions from both staff and customers.
In addition, the government expanded the list of allowed during the quarantine activities. We are talking about the sale of spare parts for vehicles, including, for tractors and other agricultural equipment; the sale of day-old Chicks of poultry; the operation of all types of financial institutions, including pawnshops and credit unions.
As the oil war will affect Ukraine
In addition to the coronavirus pandemic and the global economic crisis, one of the main global remains a price war between Saudi Arabia and Russia. Beginning in early March, the confrontation does not subside, and after that continue to fall in the price of “black gold”.
So, in the first quarter of 2020 Brent crude oil fell a record 66 percent, WTI rose by 67 percent. As at 1 April futures for Brent crude oil decreased to 25.41 per barrel, and WTI – to 20.11 per barrel.
Such low prices may remain for quite a long period. While no one can predict when the end of the coronavirus pandemic, and the global markets will resume economic activity.
As for the Ukrainians, the main question is how will this affect the domestic economy and on fuel prices.
According to the Antimonopoly Committee in December 2019 the price of gasoline and diesel fuel at Ukrainian gas stations have fallen on average by 13 percent. While the Committee believe that there is potential for a more significant drop in prices. This AMC has tried to convey to the leaders of large networks of stations at a meeting held this week.
“Market participants gave a full explanation on the current situation with the pricing and most of them agreed with the conclusions of the AMCU regarding the potential for further decline in prices,” said Antitrust Committee.
Meanwhile, the Director of consulting group “A-95” Sergey Kuiun not so optimistic in their forecasts. According to him, due to the stabilization of the exchange rate the cost of gasoline at Ukrainian filling stations do have the potential to reduce at around 3 hryvnia per liter. But Kuyun also said that due to quarantine falls in business activity, which would entail a decline in sales at gas stations, which can compensate by increasing margin or cut the part of the staff.
Rather vague, the prospects of Ukrainian companies producing oil and gas. Representatives of the largest oil companies in the country Ukrnafta said that without the support of the state leadership the company faces financial collapse and stop production because of falling demand for petroleum products and a record decline in oil prices.
The company has proposed the government to introduce for oil and gas companies tax holidays on payment of rent payments for the period until the end of 2020, or to change the Tax code, temporarily reducing the rent rates for oil and condensate to 6 percent.
The upcoming week also promises to be busy economic news. The focus of attention will remain the coronavirus and its impact on domestic and world economy. In addition, the Parliament may meet in extraordinary session to adopt amendments to the budget and the law on banking regulation in the second reading, that will open the way to the start of a new cooperation program with the IMF. From next week the weather conditions will allow most cities to complete the heating season, and the civil service statistics will publish data on inflation in March.