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8 May 1998
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Kiev will become Europe's financial capital from May 8-12, when it will host this year's annual meeting of the European Bank for Reconstruction and Development. About 3,000 of the world's financial elite are expected to participate in the event. According to EBRD Secretary-General Antonio Maria Costa, the choice of Ukraine as a host of the meeting is recognition of Ukraine's economic and political role in the world. In his words, the EBRD's decision was aimed at giving Ukraine an opportunity to present itself to the world as a prospective business partner. According to acting EBRD President Charles Frank, the Kiev gathering will be particularly memorable for him personally: he is expected to be officially elected president of the bank. The bank's senior officials are also expected to adopt a new strategy of further operations. Particular attention will be paid to extension of the bank's operations in countries with economies in transition, including Ukraine, for which new projects are to be considered. Among the projects already drafted for Ukraine are an EBRD credit line for supporting small and medium businesses and creation of a company named UkrEsco. Two loan grants for financing reconstruction of the Chernobyl NPP’s sarcophagus are also planned to be signed. Ukraine's President Leonid Kuchma and EBRD acting President Charles Frank will address the issue of financing the completion of the Khmelnytskyi and Rivne nuclear power stations. Several business seminars will be held as part of the annual meeting. They will focus on crediting, investment, development of business systems in various countries, and the business opportunities resulting from introduction of the euro, the new European common currency. An exhibition of investment opportunities in Ukraine will present 200 large investment projects and up to 1,000 smaller investment proposals. Four regions of Ukraine will hold separate investment exhibitions. The exhibition will be opened on May 9, by Prime Minister Pustovoitenko and the president of the European Bank for Reconstruction and Development. Business seminars and roundtable conferences will acquaint its participants with the key sectors of the Ukrainian economy that require investments as well as the most attractive to investors regions.


According to Finance Minister Ihor Mitiukov, his Ministry has drafted a package of laws, presidential decrees, and Cabinet resolutions aimed at increasing state budget revenue. The package, inter alia, provides for measures to reduce barter operations:

  • introduction of financial accountability for non-observance of limits set on signing barter contracts;
  • a total ban on carrying out barter operations with separate, highly liquid excise goods;
  • introduction of indicative prices on separate goods for barter agreements;
  • determination of sums of compensation of VAT depending on the conduct of barter operations in Ukraine (this draft presidential decree has already been fully coordinated and will be sent to the Presidential Administration in the near future). Barter operations accounted for 43% of the total volume of sales in 1997 and 41% of sales in the first quarter of this year. Barter is the main form of sale in the electric power, fuels, construction materials, and tire industries.

    The package includes measures to regulate excise duty:

  • a draft law to transfer excise duty from alcoholic beverages to ethyl alcohol has been sent to the Presidential Administration and added to the list of documents which are to be adopted in the near future;
  • the Finance Ministry is initiating a review of excise duty rates, with increases in rates on alcoholic beverages, tobacco products, and gasoline. A general reduction of the list of excise goods is proposed, since for some goods, administrative expenses on collecting the duty exceed excise duty revenues. This year, the budget has received 202.4 million hryvnia from excise duty, 18.2% more than in last year but 29% lower than the planned amount.

    The package also contains measures for regulating collection of value-added tax: a law and a presidential decree have been drafted on changing the procedures for calculating and compensating VAT; in particular, they provide for introducing additional advance payments of VAT. VAT revenue this year amounts to 1,088.3 million hryvnia; it was 1,558.8 million hryvnia in the corresponding period of last year. VAT revenues have fallen due to a 984.8 million hryvnia increase in arrears since the start of the year and new legislation on VAT, according to which 1,983.3 million hryvnia in prepaid sums of VAT is to be reimbursed to taxpayers (1,405.8 million hryvnia has been returned to date). In addition, bills have been drafted on exempting operations with government internal loan bonds from profit tax and introducing a stamping fee for registration of agreements and other economic documents.


    On  May 8,  the  European  Bank  for  Reconstruction  and   Development   opened   its    new representative office in Kiev. EBRD acting President Charles Frank said the opening of the new office  signified  the   strengthening of the bank's presence in Ukraine. He expressed satisfaction with the bank's successes in Ukraine.  Mr. Yaroslav  Kinakh,  head  of the EBRD office, said the Bank believes in Ukraine and its great potentials.  He  compared  Ukraine  to  a  sleeping beauty waiting to be  awakened,   and  expressed hope  that  delegates to this year's EBRD meeting will see the country's great potentials and join forces  in  assisting its development. Ukraine's Deputy Prime Minister Serhiy Tyhypko said the EBRD's  operations  in  Ukraine   have already yielded significant results. He thanked the  EBRD  leadership  for  its  trust  in  Ukraine,  adding  that  he considered  the  opening  of  the  new  office  as  a  revelation  of  the  bank's  intention  to work in Ukraine for a long time.


    The Main Objectives of Monetary and Credit Policy in 1998 have been drawn up, the National Bank of Ukraine’s said. They will be submitted to a parliamentary commission for consideration in the last weeks of May. According to the draft, the National Bank of Ukraine's monetary and credit policy will be aimed at achieving the government-determined 1998 indicators of 12% inflation per annum, 0.5% growth in actual GDP (101.1 billion hryvnia in 1998), state budget revenues of 21.1 billion hryvnia, and a maximum deficit of 3.4 million hryvnia (3.3% of GDP). The NBU plans to increase base money by 2.6 billion hryvnia (24%); base money will thus turn over 8.4 times and reach 15 billion hryvnia by the end of the year. The volume of refinancing of Ukrainian banks, according to the plans of the NBU, is to amount to 500 million hryvnia, which should lead to bank loans to the economy rising to 800 billion hryvnia.

    In 1998, the NBU will not make direct loans to the Finance Ministry and will meanwhile prolong the indebtedness on loans earlier provided to the ministry: - 3 billion hryvnia in loans in the national currency until the year 2008; - 1.2 billion hryvnia in foreign currency loans until 1999. Currency policy will be aimed at keeping the exchange rate of the hryvnia in line with the balance of supply and demand on the market, and the payment balance of the country. National Bank of Ukraine intervention on the currency market will be aimed only at "forestalling fluctuations in the currency exchange rate."

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