Week’s balance: gas production growth, forex without passports, and "rebirth" of motorway maintenance
Ukraine has increased its own gas production and the rate of gas injection into storage facilities; the National Bank abolished the regulation obliging citizens to present passports when buying foreign currency; and the government announced the expansion of the scope and geography of road works – these are the main economic news of the past week.
The first week of August was traditionally uneventful in terms of economic news. This is primarily due to the holiday period at all major enterprises and public institutions. Even the government has decided not to hold its weekly meeting.
Meanwhile, several significant events should be mentioned. Ukrtransgaz reported a 6% increase in gas production in Ukraine. According to the state-owned company, in July, production grew to 1.7 billion cubic meters. In general, since the beginning of year, natural gas production has increased by 0.3% and amounted to 11.8 billion cubic meters.
At the same time, the volume of gas injection into underground storage facilities in the past month remained at the level of June – some 1 billion cubic meters. Before September, Ukraine intends to inject as much as 3.3-3.4 billion cubic meters of gas and further bring its volume to a comfortable 14-14.5 billion cubic meters before the start of the heating season.
According to Ukrtransgaz, Ukraine is ahead of all EU countries in terms of the daily volume of gas injection into its USFs at the rate of 60 million cubic meters per day.
Rising coal price
Early August saw some significant new in Ukraine’s energy industry. From August 1, the Energy Ministry increased by 14% the price of coal, which is mined in the state mines, from UAH 1,200 to UAH 1,370 per tonne. This was announced at a press conference by Minister of Energy and Coal Industry Ihor Nasalik. He predicted that such a move would not lead to an increase in electricity tariffs. But due to this step, the government-owned mines until the end of 2016 would receive an additional UAH 260 million, he claimed. Nasalik: coal price hike will not lead to an increase in electricity tariffs / Photo from UNIAN
"Starting April 1, the NEURC [National Energy and Utilities Regulation Commission] laid in the electricity price the cost of coal according to the ‘Rotterdam plus shipping’ formula, which is above UAH 1,370 per tonne. Therefore, such an increase in the price of coal will not affect electricity tariffs," said the minister.
Nasalik also reported on the results of his working visit to Tehran, which ended early last week. According to him, the Iranian authorities have declared readiness to transport its oil to Europe via Ukraine, using the idle capacity of the Odesa-Brody oil pipeline. Ukrtransnafta is currently in process for the technical preparation of this route.
Iran is not the only international partner with whom Ukraine has begun to enhance cooperation in the energy field. Nasalik said that the United States had provided Ukraine a $260 million loan for building a storage facility for spent nuclear fuel at the zone around the Chornobyl nuclear power plant.
"At the negotiations in the United States, which took place in late June, we signed a $260 mln loan agreement for the construction of a dry storage facility for spent nuclear fuel, which will be built on the territory of Ukraine in the Chornobyl zone," he said.
As the Minister stressed, building a storage is a consistent step of Ukraine on its way to reduce energy dependence on Russia, as the export of spent fuel to Russia each year costs our country some $200 million.
Forex without passports
A week after the National Bank took decisions on forex liberalization, it has thrown another carrot to the market. From August 10, the NBU intends to cancel the regulation obliging citizens to present passports during transactions for the purchase of currency in the amount of up to UAH 150,000, which, in turn, will simplify operations with cash currency to the public.
For sure, the market will welcome the decision, since the provision was clearly outdated. As the central bank explained, it was stabilization on the forex market that helped achieve the abolition of the "Soviet" rules.
In addition, the central bank last week has made another attempt to shrink the volume of cash within Ukraine. Thus, the NBU has offered to reduce threefold the maximum amount of cash settlements for individuals in the amount of UAH 50,000. At the same time, according to the National Bank’s plan, there will be no restrictions imposed upon non-cash payments.
First of all, this step is due to the fact that currently, the volume of cash money in Ukraine amounts to 14.6% of GDP. Meanwhile, a comprehensive program of development of Ukraine’s financial sector until 2020 provides its decline to 12% of GDP.
Only the next month will it become clear if the NBU takes such decision. At the moment, the draft resolution was submitted for public discussion.
But the NBU’s steps were not the only event in the financial sector last week.
A "single window" electronic system, initiated by the Finance Ministry, has started working at the Ukrainian customs from August 1. This innovation involves the creation of a unified electronic database that allows different controlling bodies and customs offices to automatically exchange information on the cargo that passes through the Ukrainian border.
"This will contribute to the simplification of customs formalities and narrow opportunities for corruption at the customs," said Prime Minister Volodymyr Groysman.
In addition, from August 1, all state institutions are required to use Prozorro e-procurement system when holding tenders for procuring goods worth up to UAH 200,000 and services worth up to UAH 1.5 million. The first results of the use of Prozorro are already visible. According to the Ministry of Economic Development, Prozorro will allow the state to save up some UAH 5 billion by the end of 2016, and in next year – to increase the savings tenfold. Despite the fact that some government agencies have found a way to circumvent the system, this is an impressive figure.
Road repairs reach the regions
The Ukrainian government has decided to use the summer period more actively for motorway maintenance works and construction of highways. As Groysman wrote on Facebook, the Cabinet extended the scope and geography of road works in Ukraine.
The government enjoys serious support in this field. The World Bank, which actively participates in the development of Ukrainian national economy, has pledged to finance the work of several experts of the European level, which will help develop a strategy for the development of Ukrainian motorways.
"Given that our goal is Europe, that we must implement the requirements of European legislation, it is necessary to request assistance in the development of this strategy from experts and professionals of the European level, or from the United States. There is confirmation from the World Bank, as they say they are willing to provide funding for [the work of] at least eight professionals of the European level," said the press service of Deputy Prime Minister Volodymyr Kistion, whose area of responsibility includes transport infrastructure and the road sector.
The Bank's interest in Ukrainian road infrastructure is easy to explain. The thing is that our country lies at the crossroads of transport corridors, but less than 50% of Ukrainian motorways meet modern requirements. And that is why the international community is interested in and ready to contribute to the development of Ukraine’s road sector. At present, the World Bank already implements several road construction projects in Ukraine worth more than $1 billion.
Despite an active holiday period, the country has not stepped down its foreign political activity. An important event of the past week was the official visit of President of Ukraine Petro Poroshenko to Malaysia and Indonesia. The leaders discussed a number of important, including the economic, issues.
"Along with President Petro Poroshenko, our trade mission consisting of 18 representatives of Ukraine’s exporters is also going for this visit. Roundtables, B2B meetings, visits to the sites of potential contractors and many more useful things await them. The mission sends businesses, which have some very, very interesting potential in these markets," Ukraine’s Trade Representative Natalia Mykolska wrote on Facebook.
One of the key outcomes of the president’s visit for the national economy was the signing of an agreement between Ukraine and Malaysia on the avoidance of double taxation and prevention of tax evasions regarding taxes on income. Among other things, this document defines the procedure for the taxation of dividends, interest, royalties, income from transfer of property and the like. Individual conditions are determined for the taxation of pensions, income of civil servants, artists, athletes and students.
During the talks, the heads of state noted the great prospects of cooperation between Ukraine and Malaysia in the field of healthcare and tourism.
Indonesia, which has been developing no less actively, also became a platform for negotiations. In particular, the heads of state signed an agreement on cooperation in the defense sector between the Ukrainian Cabinet of Ministers and the Government of Indonesia. The parties also paid special attention to investment, the access of Indonesian products to the Ukrainian market and the Ukrainian goods – on the market of Indonesia. Cooperation in the field of agriculture, as well as in high-tech industries such as aerospace was also discussed.
The second week of August in the Ukrainian economy is also unlikely to be too eventful. However, the hard-working Ukrainian farmers have no time for vacation. Over a week, as of August 5, they have harvested the area of 9 million hectares, having fulfilled the forecast by 94% with the yield of 35 million tonnes of early grain crops. According to the relevant ministry, at the end of the year, the yield will exceed 60 million tonnes.
Nadia Burbela (UNIAN)