Date: September 29, 2017
The Cabinet's abrupt revocation of the state prices regulation that covered a number of essential food products, the lack of effective antimonopoly interventions and measures to stimulate the economy resulted in Ukraine's inability to fit into the inflation rate forecasted by the National Bank at 8% ± 2 pp. per year.
This is the opinion expressed by the Head of the Verkhovna Rada Committee on Financial Policy and Banking, member of the Oleg Lyashko's Radical Party Serhiy Rybalka in the "Observer" blog.
"The abolition of state regulation of prices for a number of goods and services exacerbated by the high monopolization of Ukrainian markets spurred the inflation. Another factor that is driving up prices is the continuing recession of the national production," the deputy pointed out.
"After the state regulation of food prices was abolished the Cabinet was boasting of decreased administrative pressure on business. The argument they favored the most was that the market and competition will work better for the consumer. Prime Minister Vladimir Groisman assured that this measure will hardly produce any effect on inflation. Although in fact, we have some commodity groups almost completely monopolized," Rybalka stressed.
According to Mr. Rybalka, Ukraine should follow into the footsteps of the EU and the US in matters of ensuring food security. "They [the EU] have set themselves the goal of lowering prices and dramatically improving the productivity of agricultural production. To ensure low domestic prices, they stimulated exports, limited imports and set high prices for government purchases," the MP said.
Another mechanism for curbing price hikes is the timely access to the market of the state who, as one of the players, can use state reserves. "The most striking example is the US strategic oil reserve created after the 1973 world oil crisis."
In his opinion, the task of restraining inflation in many aspects is the responsibility of the government "which had to give up the rains of administrative regulation smoothly, step by step and only then start building an effective system of leveraging prices in strategic sectors: food production and power generation."
"Not less importantly, we need to dramatically improve the effectiveness of the Antimonopoly Committee. The time of turning a blind eye to oligarchic conspiracies or collecting bribes from monopolists is over," the head of the Parliamentary Committee stressed.
Another strategic way of pushing the prices down is to step up our own production, substitute imported goods, saturate the domestic market with high-added value domestic commodities created in conditions of healthy competition, wrote S. Rybalka. Therefore, the Radical Party is consistently working on creating a set of incentives for the development of domestic industry.
He also added that the NBU should provide to the national banks special preferential long-term loans exclusively for cheap lending of the small and medium-sized businesses. "We saw that such plans have finally appeared in the Fundamentals of Monetary Policy for 2018. This is a positive sign,"- S. Rybalka wrote.
"If the National Bank keeps restraining inflation exclusively by means of monetary starvation, it will stifle economic growth. We believe that the role of the NBU is to restore confidence in the banking system and focus on stimulating lending, in particular, to small and medium-sized businesses, and mortgage lending. As to the task of curbing inflation, it is the task to be solved jointly by all public agencies," - the deputy summed up.