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Tuesday, March 03, 2015 5:23 PM

Ukraine Hikes Rate to 30%, Requires Corporations to Sell 75% of Foreign Currency Earnings; Miners Not Paid For 3 Months

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In an effort to arrest hyperinflation and general panic over rising food prices, Ukraine's Central Bank Hikes Benchmark Rate to 30 Percent.

Ukraine's central bank will raise its benchmark refinancing rate to 30 percent from 19.5 percent, the head of the central bank said on Tuesday, as the bank tries to rein in rocketing inflation and persistent currency weakness.

The new interest rate, which comes into effect on Wednesday, is the highest for 15 years.

Central bank chief Valeriia Gontareva said in a media briefing that the decision was taken because the bank saw the "threat of inflation had risen strongly due to negative consequences from currency market panic".

The bank will also extend a rule obliging companies to sell 75 percent of their foreign currency earnings among other measures to help stabilise the hryvnia, which Gontareva said she hoped would return to a level of 20-22 to the dollar "quickly".
Interbank Trading

There is no "threat of inflation", there is inflation. In light interbank trading, the quote ranged from 24.50 to 25.00 UAH/USD compared to 30.01 on February 26.

With all the restrictions, and gimmicks, it's hard to call this a market.

Corporations Must Sell 75% of Foreign Currency Earnings

In addition to the rate hike, NBU Extends Rule Mandating Sale of 75% of Foreign Currency Earnings.
The national Bank of Ukraine extended the requirement for mandatory sale of 75% of foreign exchange earnings, said the head of the National Bank of Ukraine Valeria Gontareva on Tuesday.

"Our decision, Resolution No. 758, do not change. The mandatory sale of 75% of foreign exchange earnings remains," said Gontareva.

Recall that in November 2012, the NBU introduced mandatory sale of foreign exchange earnings for exporters. In August 2014, the NBU has obliged them to sell 100% of foreign exchange earnings. In September 2014, the NBU reduced the requirement to 75%.
Miners Block Road Due to Lack of Payment for Three Months

Ukraine is so broke it has not been able to pay miners at state-owned mines. Please consider Rebellious Miners Blocked the Road Lviv-Kovel"
The movement on the inter-regional highway from Lviv to Kovel was paralyzed: The road was blocked by striking miners, demanding payment of wage arrears.

Local officials who came out to talk just shrug and say the financial problems miners face is impossible to solve.
Miners Protest in Kiev

Also consider Miners of Western Ukraine Announced an Indefinite Strike in Kiev.
Among the strikers at the Verkhovna Rada [Ukrainian Parliament] are many workers from Western Ukraine, in particular, seven buses with miners from the Lviv region.

At the Verkhovna Rada and the Cabinet of Ministers, five hundred miners protested. They hit their helmets on the ground, and insist someone in authority speak with them.

Miners demand salary arrears for three months and state budget planned subsidies to the coal industry. Outraged miners from Lviv and Volhynia announced an indefinite strike.
Miners Forced Into Army

Want to get paid? Join the Army.

In the Volhynia region of Ukraine, sent 800 Miners Sent Draft Notices.
Miners in Western Ukraine who threatened a large-scale rebellion over a three-month salary delay were drafted into the army.

Eight hundred miners-rebels from Volhynia received the notice which the military commandants carried straight to the mine.

A miner from Novovolynsk said "It's worse now than in the 90s. People starved then, but there was no war. Now there is a complete ruin".
Black Market Rates

Reader John whose sister lives in Lviv, has not heard from her for a few days. Thus, I cannot say how the black market has responded to the miner protests or the rate hike to 30%.

Hopefully within a couple days I will have the street exchange rates to post.

Mike "Mish" Shedlock

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