KIEV, Ukraine -- In December, Ecuador became the first country to buckle under the current financial crisis and default on its loans. Now with its outlook deteriorating rapidly, there's a good chance that Ukraine will become the second.
Ukraine took three significant blows within the space of the week. The International Monetary Fund said on Feb. 7 it was delaying the second $1.9 billion tranche of a $16.4 billion loan, which led to Thursday's resignation of Ukraine's finance minister Viktor Pynzenyk.Pynzenyk said he was stepping down because of the government's refusal to cut its budget deficit according to the terms of the loan left him in an untenable position.On top of that, ratings agency Fitch cut the country's long-term foreign and local currency credit rating to below investment grade -- to "B" from "B+" with a negative outlook -- meaning that a further downgrade is likely.Together this spells big new troubles for Ukraine, according to Paul Biszko senior emerging market strategist at RBC Capital in Toronto. "Debts particularly on the private sector side and extreme liquidity stress could push Ukraine into default," Biszko told Forbes. "The odds are rising."Ukraine had pledged to cut its budget deficit by $4.9%, to $10.0 billion -- 1.1% of gross domestic product -- but infighting between arch-rivals Prime Minister Yulia Timoshenko and President Viktor Yushchenko has meant that it has not followed through so far.With elections coming up next year, and an economy suffering as a result of a plummeting currency and falling commodity prices, it is very unlikely to do so in the future.Timoshenko has been appealing to Russia and the Group of Seven nations to step in with support with a $5.0 billion loan, but RBC's Biszko says there is "little chance of bilateral cash" coming through.According to Tom Fallon, head of emerging markets at fund manager La Francaise des Placements, Ukraine may be able to struggle through the current year, because its external debt that must be repaid this year represent less than a project 10.0% of fiscal revenues.Ukraine's final hope of a rescue may lie with the European Central Bank. A major exporter of steel to the rest of Europe, a transit route for Russian gas, and with many local banks belonging to major European ones such as Unicredit, ING and Raiffeisen, a default by Ukraine is a risk the central bank may be unwilling to take.Defaulting on loans can be devastating to an economy: Argentina's default in 2001 wiped out a quarter of that year's gross domestic product, and has taken a long and painful restructuring process to get it back on track.
Showing posts with label credit crunch. Show all posts
Showing posts with label credit crunch. Show all posts
Wednesday, 18 February 2009
Sunday, 14 December 2008
500,000 Russians loose their Jobs in November
At least 500 thousand Russians were laid off in November, the Kommersant newspaper reports, citing labor market data from the Ministry of Public Health and Social Development. Experts interviewed by the newspaper predicted that unemployment could rise from 6.1 to 7 percent by the end of the year.
According to the official data from the Ministry and Rostrud (the Federal Labor and Employment Service) the number of people registered as unemployed rose by 15.8 percent from the previous year, from 1.203 to 1.498 million.
Nearly 200 companies have also revealed plans to shorten their work hours or send employees on mandatory leave.
Yet the data may not show the full scale of layoffs.
“Not all organizations present this information,” a statement by Ministry of Public Health explained, “and this is especially characteristic for small businesses.”
Only a share of businesses officially report layoffs to the Ministry, and some companies have gone to great lengths to make fired workers look like "voluntary resignations". Finally, not all laid-off workers register at the unemployment office, making their situation impossible to track.
According to Kommersant’s estimates, which account for unreported layoffs, the actual job loss rate may have been as high as 800 thousand in November. The corresponding number of total unemployed workers may exceed 5 million.
According to the official data from the Ministry and Rostrud (the Federal Labor and Employment Service) the number of people registered as unemployed rose by 15.8 percent from the previous year, from 1.203 to 1.498 million.
Nearly 200 companies have also revealed plans to shorten their work hours or send employees on mandatory leave.
Yet the data may not show the full scale of layoffs.
“Not all organizations present this information,” a statement by Ministry of Public Health explained, “and this is especially characteristic for small businesses.”
Only a share of businesses officially report layoffs to the Ministry, and some companies have gone to great lengths to make fired workers look like "voluntary resignations". Finally, not all laid-off workers register at the unemployment office, making their situation impossible to track.
According to Kommersant’s estimates, which account for unreported layoffs, the actual job loss rate may have been as high as 800 thousand in November. The corresponding number of total unemployed workers may exceed 5 million.
Why Putin will regret his pronoucments
Prime Minister Vladimir Putin became yet another high-ranking Russian civil servant to admit that an economic crisis exists in the country. He did this loudly and solemnly at a congress of the party of power. And having promised that there would not be a repeat of the 1998 collapse, he took personal responsibility for the social impact of the crisis, which even such a mighty national leader doesn’t have the power to prevent.
Unlike President Dmitri Medvedev’s statement, which confessed that 2009 would be a hard year for Russians, or the interview with Minister of Economic Development Elvira Nabiullina, which acknowledged the breakdown of the Russian economic model from Putin’s time [in office], Putin’s performance was liberally replayed on national television. Russians will remember precisely two of his excerpts, that a crisis exists, and that there won’t be any social impact. They will be remembered when the numbers at currency exchanges start to traitorously turn to favor the bourgeois and vanishing dollar. They will astonish yet another laid-off employee, when he cannot find a new job, and discovers that the government which promised to help him can do nothing for its citizen. Precisely these words will be quoted, when yet another strategic enterprise, or more importantly, a city’s major employer ceases operations, sending its workers overboard…
One can list such possibilities to remember Vladimir Putin’s words endlessly. Something else is more important: from the simple, popular point of view, these were the most important words of his political career. The public remembers well that Boris Yeltsin promised to lie down across the rails if prices grew, and then didn’t lie down. He promised that there would be no default, and then there was a default. But before these unkept promises, Yeltsin had a large and turbulent political biography under his belt: the anticipation of changes, that amazing air of freedom which today is already difficult to feel in Russia’s twilight (incidentally, the air becomes so thin during crisis years, that it sometimes seems fresh). And for Putin -years of assurances of stability, ending in admitting a crisis. That is why the Russian national memory won’t put President Putin together with stability, the fight with America and a glamorized Rublevka. There will only be Prime Minister Putin, who didn’t protect the country and her residents from a fiasco.
But could he have kept silent about all this? Probably, since no one was making him or his speech-writers speak up. In general, that’s how a public official differs from a televised underling. He tells the people the truth, which is sometimes bitter. Especially since Vladimir Putin doesn’t need to be elected anywhere, anytime soon. Or am I mistaken? But having been created by television, these people only believe their receivers. They believe that if you say that there's no crisis,it won't happen. They believe that if you say a crisis exists, but there won’t be an impact, then there won’t be.
Today’s elite, which had its hand held as it was brought into power, which never had to fight with anyone for it, which confused the government with a corporation and is incapable of a simple analysis of the situation six months ahead, much less of making strategic decisions, believes in an a remarkable manner in the power of the word, not of the action. Of the televised word. Appearing before a carefully arranged audience, that’s precisely why Vladimir Putin delivered what may end up being the most important and sole remembered speech of his future biography.
Unlike President Dmitri Medvedev’s statement, which confessed that 2009 would be a hard year for Russians, or the interview with Minister of Economic Development Elvira Nabiullina, which acknowledged the breakdown of the Russian economic model from Putin’s time [in office], Putin’s performance was liberally replayed on national television. Russians will remember precisely two of his excerpts, that a crisis exists, and that there won’t be any social impact. They will be remembered when the numbers at currency exchanges start to traitorously turn to favor the bourgeois and vanishing dollar. They will astonish yet another laid-off employee, when he cannot find a new job, and discovers that the government which promised to help him can do nothing for its citizen. Precisely these words will be quoted, when yet another strategic enterprise, or more importantly, a city’s major employer ceases operations, sending its workers overboard…
One can list such possibilities to remember Vladimir Putin’s words endlessly. Something else is more important: from the simple, popular point of view, these were the most important words of his political career. The public remembers well that Boris Yeltsin promised to lie down across the rails if prices grew, and then didn’t lie down. He promised that there would be no default, and then there was a default. But before these unkept promises, Yeltsin had a large and turbulent political biography under his belt: the anticipation of changes, that amazing air of freedom which today is already difficult to feel in Russia’s twilight (incidentally, the air becomes so thin during crisis years, that it sometimes seems fresh). And for Putin -years of assurances of stability, ending in admitting a crisis. That is why the Russian national memory won’t put President Putin together with stability, the fight with America and a glamorized Rublevka. There will only be Prime Minister Putin, who didn’t protect the country and her residents from a fiasco.
But could he have kept silent about all this? Probably, since no one was making him or his speech-writers speak up. In general, that’s how a public official differs from a televised underling. He tells the people the truth, which is sometimes bitter. Especially since Vladimir Putin doesn’t need to be elected anywhere, anytime soon. Or am I mistaken? But having been created by television, these people only believe their receivers. They believe that if you say that there's no crisis,it won't happen. They believe that if you say a crisis exists, but there won’t be an impact, then there won’t be.
Today’s elite, which had its hand held as it was brought into power, which never had to fight with anyone for it, which confused the government with a corporation and is incapable of a simple analysis of the situation six months ahead, much less of making strategic decisions, believes in an a remarkable manner in the power of the word, not of the action. Of the televised word. Appearing before a carefully arranged audience, that’s precisely why Vladimir Putin delivered what may end up being the most important and sole remembered speech of his future biography.
Sunday, 16 November 2008
Russia and Ukraine
KIEV, Ukraine -- Ukraine's central bank will continue to intervene in currency markets by buying and selling unlimited amounts of dollars, First Deputy Chairman Anatoly Shapovalov told Reuters on Friday
The central bank has been intervening every day for the past two weeks to try to prop up the hryvnia, which slipped on Wednesday to a historic low of 7.2 to the dollar. It has since bounced bank and was quoted 5.86-5.95 on Friday.Shapovalov said a requirement for banks to sell the dollar at the rate they bought from the central bank would remain in force for several days. It offered to sell dollars at 5.95 hryvnias on Friday and at 6.05 on Thursday.The bank is trying to bring interbank rates for the hryvnia back in line with the rates at which it intervenes, after market rates reached 7 to the dollar earlier this week when the bank was selling limited amounts of dollars at 5.7."We intervened yesterday, selling $500 million dollars. We therefore demand that if they bought from central bank reserves, they then meet client orders at that rate and their profit is the commission," he said."Today, we will send a letter saying that dollars bought today at 5.95 hryvnias have to be sold at 5.95 ... This is meant to calm the market. At the very least, this will happen today, tomorrow, and then we will see."He said he expected the bank to sell fewer dollars on Friday than the $500 million on Thursday.The office of President Viktor Yushchenko on Thursday criticised the bank's failure to stabilise the hryvnia despite selling $5 billion in the past three weeks.Central bank reserves stood at $37.5 billion as of end-September. Officials have since then have said the reserves stood at $33-34 billion.
The central bank has been intervening every day for the past two weeks to try to prop up the hryvnia, which slipped on Wednesday to a historic low of 7.2 to the dollar. It has since bounced bank and was quoted 5.86-5.95 on Friday.Shapovalov said a requirement for banks to sell the dollar at the rate they bought from the central bank would remain in force for several days. It offered to sell dollars at 5.95 hryvnias on Friday and at 6.05 on Thursday.The bank is trying to bring interbank rates for the hryvnia back in line with the rates at which it intervenes, after market rates reached 7 to the dollar earlier this week when the bank was selling limited amounts of dollars at 5.7."We intervened yesterday, selling $500 million dollars. We therefore demand that if they bought from central bank reserves, they then meet client orders at that rate and their profit is the commission," he said."Today, we will send a letter saying that dollars bought today at 5.95 hryvnias have to be sold at 5.95 ... This is meant to calm the market. At the very least, this will happen today, tomorrow, and then we will see."He said he expected the bank to sell fewer dollars on Friday than the $500 million on Thursday.The office of President Viktor Yushchenko on Thursday criticised the bank's failure to stabilise the hryvnia despite selling $5 billion in the past three weeks.Central bank reserves stood at $37.5 billion as of end-September. Officials have since then have said the reserves stood at $33-34 billion.
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