Eva Antonenko
22 August 2022 09: 30
Headings: News Society Economy

"Swan, pike and cancer": the NBU, the Ministry of Finance and the Office of the President cannot agree on the issue of "printing" money and taxes

This prevents the formation of a stable and realistic military budget.

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"Swan, pike and cancer": the NBU, the Ministry of Finance and the Office of the President cannot agree on the issue of "printing" money and taxes

Currently, a conflict has arisen between the Ministry of Finance, the National Bank of Ukraine and the Office of the President on the issue of financing the budget through the issuance of the hryvnia. We talk about the essence of the conflict and how each side argues its position.

The NBU is categorically against the "printing" of money

Head of the NBU Kirill Shevchenko advocates for reducing the printing of the hryvnia, raising rates on domestic government bonds and bringing the balance of domestic debt to positive indicators, at which bond rates should be attractive to investors - that is, cover inflationary risks.

 “If we limit ourselves to UAH 400 billion. [“printed” money] for 2022, the impact on the economy will be manageable. If the “money printing” to finance the budget deficit grows at a more significant pace, this will aggravate the risks. Significant emission may accelerate the inflation-devaluation spiralwhen it becomes necessary to index expenses, "printing" more and more money for this. In such a scenario, we will feel the consequences of not being ready to make unpopular decisions for a very long time to come.”Shevchenko explained.

According to him, the NBU also answers “no” to the proposals of the Office of the President "print money". Shevchenko believes that emission is an emergency aid that helps at the moment, but in large doses or in case of difficult situations it will lead to complications.

The greatest discussions on this topic take place with the government, that is, between institutions that bear political responsibility, and the main problem in them is not even emission, but a serious budget deficit that needs to be financed from something. The goal of the Ministry of Finance, according to Shevchenko, is precisely to cover the deficit in the short term, and the goal of the NBU is to ensure the stability of the monetary unit in the long term.

The Ministry of Finance is not against inflation

Minister of Finance Sergey Marchenko saidthat now about 30% of GDP is spent on financing the defense sector, and «our partners categorically do not give us money for military needs». Therefore, the country does not have enough of its own revenues: for example, in July, UAH 87,9 billion was collected from customs, military spending amounted to approximately UAH 130 billion. or National Bank.

“The NBU is in its own paradigm, where we, first of all, need to stabilize the situation and fight inflation. This is all good and very important, but we have practically no domestic market. Our logic is simple: we do not have such an increase in income to service these debts at such rates in the future. But we still raise profitability, albeit slowly, because we understand that we need to work with the market one way or another”, - Marchenko explained the position of the Ministry of Finance.

According to him, it is practically impossible to increase budget revenues now, therefore the question remains of reducing spending, including social.

«Inflation in a country at war is a story that may well take place. (…) Let’s be honest: given the scale of the challenges, when, for example, the defense budget has grown tenfold, both devaluation and inflation are “externalities” that allow us to balance the situation”, The minister said.

Also in the Ministry of Finance are for a return to pre-war fuel taxation. Recall that taxes on it were reduced to contain prices and provide the country with fuel in a deficit.

In the Office of the President - for "printing" and raising taxes

Deputy Head of the President's Office Rostislav Shurma считаетthat such a conflict between institutions is a normal situation for developed countries, but in extreme situations everyone should work as a team. According to him, given the balance of export-import operations, the solution of the issue of paying the state debt and significant support from international partners, this amount can easily amount to from 30 to 60 billion UAH. per month: This is the range that does not create problems.

Shurma was also skeptical about the radical 10-10-10 tax reform, more about which we told in our material: if adopted, this reform calls into question tax revenues to the budget, because at the expense of its own revenues Ukraine still barely covers only 30% of its needs.

Shurma believes that in Ukraine under-taxing things like pollution or harmful consumption, i.e. tobacco, alcohol, petroleum products.

Summing up, we can draw a key conclusion: the arguments of each of the departments are quite justified and have a place to be, however, in order to stabilize the economic situation and form the military budget, they will have to agree - otherwise the economy may continue to “shake” with sharp inflationary surges, which we observed recently when the NBU key rate is increased immediately by 25%.

The same applies to emission, which neutralizes all the efforts of the NBU to curb the depreciation of the hryvnia and leads to a constant increase in prices for everything. If the state decides to take the path of further money printing, ordinary Ukrainians will continue to suffer the most from this, whose incomes in hryvnia equivalent continue to decline without that. And as a result, the purchasing power of citizens is decreasing, which leads to a decrease in production and the number of services provided (the very work of business, the importance of which the authorities regularly talk about) and a slowdown in the Ukrainian economy as a whole.

Previously, we wrote that Ukrainian men want to be allowed to leave the country for 200 thousand hryvnias, and that Ukraine introduced a ban on increasing utility tariffs until the end of the war.


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