#Commentary of Marina Zheynova on raising lending interest rates on loans in Ukraine

The National Bank of Ukraine once again raised the refinancing rate – up to 16% per annum. And this is not the first increase. Over the past few months, this indicator has been increased by 3.5%.

All this happened against the backdrop of Poroshenko’s trips to Davos for the purpose of credit begging. At the same time, the government declares on all Ukrainian TV channels that “inflation is controlled and lower than projected.”

Let’s figure out what the increase in the discount rate to the economy and residents of the country may threaten with. It has long been the impression that in the NBU there are only “excellent students” of the school of economics, who in practice are even afraid of departing from the theory even with a little step.

Yes, from the theoretical point of view, in order to reduce inflation, an increase in the discount rate may be justified. Raising the discount rate, the NBU increases the cost of financial resources for banks, of course, the latter raise the rates on loans. Their interests so were not low anyway. In this regard, this step will lead to a reduction in the availability of loans for the population and business. Companies do not invest in development, do not create new jobs, the level of purchasing power falls, and inflation does not grow at such a fast pace. But this is in theory, and not for the current Ukraine.

In practice, the situation is different. In 2017, predicted inflation was at 8.2%, in fact, it turned out to be 13.7%. In 2018, they planned 7.3%, but already changed by 8.2%. Meanwhile, interest rates on new loans for households rose to 29.7% per annum!

The problem is really trivial: there is no unity in power. Raising the discount rate, the NBU reacts to the consequences, and, unfortunately, not entirely successfully. The reasons in this case are not monetary, but economic. These are the consequences of the incompetent policy of the Groisman’s government. And with the current discount rate it is obvious that not a single industry can develop.

Let’s add here another increase in tariffs for utilities, an increase in the cost of petroleum products, etc. In the end, everything will automatically be embedded in the cost of the goods and as usual will be reflected in the hollow purses of impoverished citizens.

All in all, we are once again convinced that the disastrous and incompetent policy of the Ukrainian leadership is aimed only at the achievement of benefits exclusively for the powers that be.

Marina Zheynova, the DPR People’s Council deputy

Official website of the DPR People’s Council

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