KIEV, April 7 – Ukraine’s consumer prices, led by food products, skyrocketed in March, pushing overall inflation over the past three months to a level exceeding the government’s forecast for the entire year.
The consumer prices rose 3.8% on the month in March, the highest figure so far this year, pushing the cumulative inflation to 9.7% in January through March, the State Statistics Committee reported.
The figures are much worse than has been earlier expected, representing a major setback for the government of Prime Minister Yulia Tymoshenko, who has been insisting inflation will not exceed 9.6% in 2008.
Measured on an annual basis, inflation rose to a shocking 26.2% in March compared with March 2007, which puts a mounting pressure on the National Bank of Ukraine to intervene by hiking its key interest rates.
The developments may renew calls within the government for the NBU to drastically change its foreign exchange policy towards letting the hryvnia, the local currency, appreciate against the U.S. dollar.
President Viktor Yushchenko met Tymoshenko on Monday following the release of the data, and urged the government to immediately take measures that would alleviate the inflationary pressure within the next two or three months.
“We have to get back to the issue of anti-inflationary measures and to take the most decisive steps to balance out the situation,” Yushchenko told Tymoshenko, according to his press service.
Yushchenko specifically warned Tymoshenko against resorting to administrative price controls in some sectors, such as agriculture, suggesting the measures should be aimed at stimulating domestic farmers.
“The key issue that we must take care of is to stimulate the national producer,” Yushchenko said. “This is the main anti-inflationary measure when we talk about the food market.”
Food and non-alcoholic beverage prices rose 5.6% on the month in March and were higher by 40.7% compared with March 2007, according to the committee.
Meanwhile, the anti-inflationary measure may lead to tensions between Yushchenko, a liberal economist, and Tymoshenko, who has been known of resorting to administrative price controls in the past.
Anatoliy Maksiuta, the first deputy economy minister, said Monday the administrative restriction of price hikes by the government is one of options on the table, along with increasing supply of goods and products.
The government was implementing some anti-inflationary measures since January, but two weeks ago Tymoshenko had admitted the measures had “failed to produce impressive results.”
Tymoshenko blamed the NBU for “very controversial” monetary policy, and said that inflation figures in March would show whether stronger measures were needed.
Tymoshenko’s comments underscored her unease with the NBU’s policy of pegging the hryvnia to the U.S. dollar. She, and well as Finance Minister Viktor Pynzenyk, have been pushing for the appreciation of the hryvnia in a move to slow down inflation.
Prices for food and non-alcoholic beverages in March climbed 5.6% on the month, while housing costs rose 0.9%, transportation services by 3.9% and healthcare by 1.6%, according to the committee.
Over the past 12 months, food prices rose 40.7%, followed by transportation costs 23.2%, the healthcare (17.3%) and housing (9.2%), according to the committee. (tl/ez)