On the financial situation in Ukraine – demand SPECIFIC results from the government on a quarterly basis

2014/04/15 • Analysis & Opinion

by Sergio Zalyubovskiy

I repeat my post about the financial situation in Ukraine. FYI, so to say.

I would not be celebrating, if I were Russia, i.e. the country having the external debt of 650 billion, which continues to grow this year rather disastrously, I estimate it can easily reach 800-850 billion. Instead I would be preparing canned food and packing my suitcase. The situation there won’t get better, that’s for sure.

Regarding Ukraine. The dollar usually climbs for two reasons: 1. Inflation. 2. The absence of effective mechanisms of financial regulation. If the national bank had enough currency, it could regulate the dollar exchange rate by releasing its reserves. Currently, this option is not possible. The next year or two is going to be difficult, the tax burden would be increased because of the external borrowings; subsidies would be reduced or canceled. In the absence of financial resources, it is problematic to live on borrowed funds, but sometimes it is inevitable.

Think of the previous governments satisfying their whims by embezzling the loans, which must now be repaid by the country. This is a very costly affair in the context of the country. For this reason imprisoning each of those involved would not be enough, generally speaking, they should be shot dead.

So, objective number one is to create an operating government with the lowest cost possible for its maintenance. If you continue with the overstaffed government and old legislation, nothing is going to change. Objective number two is to tighten your belts and demand SPECIFIC results from the government on a quarterly basis. Do mistrust promises to be carried out “in a year”.

The banking time runs in quarters with evaluation of interval results and reports/audience every six months, whereby recommendations are issued on the improvement of the system by the end of the year. At the end of the year financial outcome is assessed annual reports are made.

Make those reports PUBLIC!

All national banks, just like the private banks, have categories of access to financial operations based on the bank’s performance. The more financial operations a bank can perform, the larger the area of its activity and profit-making. And don’t forget that banks, just like individuals, can make profit by borrowing funds to, and placing deposits in, other banks. That is if there are funds available to place such deposits.

It is important to know your category and improve your position. Usually, it becomes clear within six months what annual results the bank would reach. There are no five year or ten year plans there.

Evaluation criteria are very simply – how much money went in, how much was spent within the country and for what purposes, how much was paid for external loans and how much was received owing to GDP. All these index numbers are added and the result is placed in the state treasury. If the result is negative or minor, this means something is not working or simply means embezzlement takes place. GDP in advanced economies covers all the state expenses and social security expenditure, therefore, individual tax burden is close to zero. Canada, Australia and New Zealand for example, return most of the paid taxes back to its citizens every year, because this is who that money belongs to. As long as the economy is sick, the citizens would have to cover the state expenses. That is your guide to control the work of the government. Once again – DO NOT TRUST LONG-TERM PROMISES. Demand publication of basic summary financial reports every quarter/six months.

Source: FB

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