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News from Kiev

January 30, 2008

I thought I’d share with you some facts regarding Kiev that perhaps don’t make the news there in the West. So here goes…

Our new Prime Minister Yulia Tymoshenko has not wasted any time since taking office. From day one she declared war on corruption saying, “We start the power-cleansing process. I will do everything not to let dirty shadow money become the key factor of the Ukrainian politics, so it can no longer buy deputies like cattle on a marketplace, and so no other politician will be eager to easily earn tens of millions.”  She also declared war on the mayor of Kiev who is said to have recently stolen 10% of Kiev real estate and distributed it among his friends. Then she focused on the energy sector by appointing her confidant as the new president of the state-owned Naftogaz.

Tymoshenko inherited a messy and corrupt energy sector and is finding that the corruption was much more expansive thanks to the previous government. Part of the problem was Russia raised the price of natural gas and Naftogaz was prevented from raising the price to consumers because Yanukovych did not want to lose popularity with the voters. 

She pushed through a new budget in record 10 days. It included the continuation of her campaign against corruption and puts into effect 36 promises Tymoshenko made during her campaign. For example – cutting the pension of parliamentarians by 50%, eliminating free transportation and lodging in prestigious resorts, and ending government subsidies for members of parliament to live in Kiev apartments. The budget also sets aside some funds to begin paying back the millions of dollars people lost in their savings accounts due to government corruption after the fall of the Soviet Union. Last but certainly not least she promised to tackle another very sensitive area – elimination of immunity from prosecution that members of parliament have used to protect themselves from shady business practices.

Hopefully as the corruption is cleaned up and business becomes more honest, the inflation will also begin to slow down. Right now the greatest economic concern is the high and rising inflation. Consumer prices rose by 16.6 percent last year according to government reports. However, we the consumers felt in our wallets a much larger increase. For example, in June you could buy 10 eggs (yes, they are sold by the 10’s here) for 3.70 greevna (or about 74 cents). Today eggs cost  9.70 greevna ($1.94). You do the math but I seriously doubt you will come up with 16.6% inflation. That comparison is just the tip of the iceberg. I could go on with quite a lengthy list but suffices to say inflation is quite a bit higher than the government stated amount. Makes one wonder why? Or maybe the better question is – who. Can you tell we are feeling the nasty “inflation” bite?

All we can do is pray and hope. Will you join us? Thanks!

One Comment leave one →
  1. January 31, 2008 11:27 am

    That is a good point I hadn’t thought about. Actual inflation on the street is much higher than what people are saying it is officially. It is “supposed” to stablize this year. We will see….

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