June 16, 2016 –
Yurasumy, PolitRussia –
Translated by J. Arnoldski
After two years of rapid decline, Ukraine’s economy is now stagnating. For the past year, the second consecutive government of the country has said that the country has reached the bottom, but that it is bouncing back. As if they intended to help, in 2015 the press began to productively work. But even pumping the economy with emission money has not helped the country. Ukraine is in dire need of investment and enterprises with working capital. But where has all this gone? Let’s take a look.
A few years ago, three specialized higher education schools producing bankers were still in operation in Ukraine. Only two remain today, and the demand for their “products” has sharply fallen. What do you all want given that the number of employees in the banking sectors has decreased by almost seven times in the past 2 years and a third of all banking institutions have closed over the same period?
According to the statement of the managing director of the Foundation for Guaranteeing Deposit Funds for Physical Entities, Konstantin Vorushilin, of the more than 55,000 banking sphere workers in Ukraine from early 2014, today only 8,000 people have kept such jobs.
The budget surplus and the population’s money
For two years, the government of Arseniy Yatsenyuk told its people that it had achieved a sharp reduction in the deficit of the country’s consolidated budget due to the surplus of local budgets. Is this a victory?
Yes, but how then can the constant complaints over lack of funding and forced measures for reducing even planned losses be explained? It’s very simple. Perhaps the answer should be sought in banks’ records? An ex-member of the Board of the National Bank of Ukraine, Vasily Gorbal, announced interesting statistics according to which over the past two years, 25 billion hryvnia in the funds of budgetary organizations have hovered over the accounts of bankrupt banks. As we know, the vast majority of this money comes from local budgets.
But as it turns out, the money that the budget collected and put into accounts has disappeared, and then a surplus appears. After all,the money was gathered, but not spent. So is this betrayal? Do you think that it could have been otherwise?
In order to understand the extent of the problem, let’s look at what fees are attached to local budgets. For all of 2015, a little more than 120 billion hryvnia was collected, and in 2014 it was 101 billion hryvnia. That is, the missing money is more than 10% of all revenue.
Where has this money gone? To offshores and into the pockets of those bankers who, taking advantage of the confusion in the country, have decided to profit for themselves. It is no secret that the owners of banks do not suffer from closures, and their money can always be saved, just as can a significant portion of the money of clients be pocketed.
Over the last 2 years, Private Bank took more than 2 billion dollars abroad. The same is being done, albeit on a smaller scale, in all banking institutions. When the National Bank of Ukraine took the decision to introduce a temporary administration, it turned out that it couldn’t manage anything. The pitiful remnants of banks’ assets do not even cover the funds for refunding private investors which, according to law, the Foundation for Guaranteeing the Deposit Funds of Physical Entities is supposed to.
In 2014-2015, the foundation made payments of up to 64 billion hryvnia and received 20 billion hryvnia from the state budget (10 billion from the National Bank of Ukraine) in 2014, and 41.5 billion in 2015 from the Ministry of Finance alone.
And this is far from the end. At the beginning of 2016, the foundation requested that the cabinet give it another 10 billion which, of course, it is getting.
But this is only the tip of the iceberg, because besides the money of individuals which banks have pulled out of the economy and transferred abroad, there are also funds which have been stolen from “economic actors”, that is, businesses.
Working capital and Ukraine’s “patriots”
We all remember the scandals linked to the bankruptcy of the giants of Ukrainian industry. These companies have no assets, no one is giving them loans, and they are forced to undergo bankruptcy which often ends in the destruction of production.
I have yet to hear of any examples of the successful redevelopment of such enterprises.
Of course, the heads of these firms are often the ones blamed. The most scandalous case was with Ukranafta, where the management set up by the minority shareholder in the person of Igor Kolomoysky, dictated terms to its state-owner and extorted money from it. Not even changing the manager helped.
I perfectly remember when Arseniy Yatsenyuk boasted that he had found an effective foreign manager in the person of Mark Rollins. This took place in June of 2015. But already by the end of August, this Englishman just shrugged and said that there was nothing he could do.
Rollins was cunning. He did exactly what the old leadership of Ukranafta before him had done. He helped to plunder the state in favor of the biggest Ukrainian patriot, Igor Kolomoysky.
Ukranafta’s debt to the budget gradually grew. Each month, the company neglected to pay 1 billion to the treasury, while in the meantime each month about 1.5-2 billion was pumped abroad through fictitious contracts. As a result, today we have 11 billion in debt to the budget and 18 billion in losses in fraudulent schemes.
How interesting. As a former businessman, I perfectly remember how I received massive headaches and tax inspections when even a couple hundred hryvnia didn’t make it to the budget, and how they took the enterprise by the throat and froze its accounts. So I want to ask Mr. Nasirov (the head of the fiscal service of Ukraine): “What are you: incompetent or complicit?” Each month, the budget is not paid a billion hryvnia, and you don’t even react. Is this a neglect of your direct duties, or is someone somewhere in Cyprus funneling this debt into some account. I think that this is a rhetorical question.
The example of Ukranafta and Igor Kolomoysky is a textbook case for Ukraine, but he alone shouldn’t be blamed for everything. Everyone who can steal something in Ukraine today is stealing from whoever they can.
The same ex-member of the Council of the National Bank of Ukraine, Vasily Gorbal, reported yet another interesting figure: over the past two years, 80 billion hryvnia in legal entities’ funds have been lost by burnt-out banks. These are the very assets which today’s enterprises are lacking. This situation is further compounded by the fact that getting credit in a bank today can only be achieved by someone who, along with the bankers, agrees to plunder. As is obvious, this doesn’t help the country’s economy at all. Even in the mid-term perspective, it exacerbates the crisis.
In the end, we have an interesting picture. The National Bank of Ukraine reports that it is successfully healing the banking system of problematic banks. Already more than a third of them are either closed or are waiting their turn. On this occasion, the management of banks, along with the managements of companies and officials, are undertaking an unprecedented-in-scale looting of the budget, the population, and Ukraine’s businesses. Everyone is satisfied while the new, much-vaunted anti-corruption organs protecting the country, of whom the new government is fond of boasting, aren’t working.
The country’s economy is stagnating, and it is likely that it will go into a new free-fall, albeit not as significant as in the previous two years.
But do you know what’s comical? Even with a thorough search, there is no “hand of Moscow” to be found here. Wherever you dig, those who are doing the looting are honored “patriots” and those who fanned the flame of civil war. They obviously know what they’ve been doing.