KIEV, Jan. 15 – The Economy Ministry admitted on Tuesday that the government’s ongoing bailout of millions of depositors dating back to the collapse of the Soviet Union may boost 2008 inflation, although moderately.
Economy Minister Bohdan Danylyshyn said Ukraine is likely to record inflation at between 10.5% and 12.5% in 2008, compared with earlier estimates of 9.8%.
The comment is a change of tone compared with persistent attempts by Prime Minister Yulia Tymoshenko, who had Sunday ruled out any inflationary impact, while some analysts have been predicting inflation to skyrocket.
“There will be no significant impact,” Danylyshyn said, adding that the payouts will probably boost inflation by 1.5 percentage points.
The comment comes as 10 million people are expected to claim their deposits in the failed Soviet-era savings bank. The government pledged to payout 20 billion hryvnias in the bailout in 2008, while the overall debt is estimated at about 132 billion hryvnias.
Out of 20 billion hryvnias, some 6 billion hryvnias will be paid in cash, while the remaining debts will be offset against goods and services, such as natural gas and electricity bills.
Tymoshenko is acting to redeem her populist campaign promise that her government would pay out the deposits, locked in the savings bank since early 1990s, completely within two years.
But the plan may endanger the country’s price stability after Ukraine has reported inflation at 16.6% in 2007, its worst inflation over the past seven years.
“Inflation, which for the past four years was recorded at serious level, may destroy certain process in 2008,” Valeriy Heyets, the head of the Economic Forecast Institute at the Academy of Sciences, said. (--by Olena Banas)