Ukraine has been in a middle of a political crisis at present. The previous president Viktor Yanukovych was turfed from power and his indulgent life was revealed to many who wanted change. His whereabouts were last seen via a private airfield where one of his helicopters had left, he is now probably out of Ukraine itself. So how he and previous Governments have an impact on Ukraine’s economy and what is the future for Ukraine?
Ukraine is divided by a Pro-European majority with Pro-Russian Supporters located in regions such as the Crimea region. With growing support for Ukraine in the EU, may have become angry and resentful towards Yanukovych’s attitudes towards the EU. When Yanuckovych decided to shun trading deals with the EU, many Ukraine became antagonized by being under the shadow of Russian influence. With transparency and democratic principles the EU offers, it has become more attractive to Ukrainians. With the economic interdependence that Europe offers it could help Ukraine’s economy to prosper.
Ukraine has not had the best chances economically to prosper, for instance after the break-off of the Soviet Union suffered from hyper-inflation and they were left unprepared for the competition that faced them in the Global Economy. To stop increasing hyperinflation and to increase their competiveness in 1996 the Ukrainian central bank replaced the old currency, the karbovanets, with the hryvnia and pledged to keep it stable in relation to the dollar”. When the interest rate was set at 1% in early 00’s Ukraine suffered, in 2006-2007 the credit growth was “73%”and inflation was rising rapidly. Another factor which contributed to this trend was the Euro Crisis whereby Ukraine lost trading and investment. The Ukrainian Central Bank was left no choice but to use almost two thirds of its reserves “$40 billion in 2011 compared to $11 billion today”. The IMF offered Ukraine a bail out but Ukraine had to raise the price of their gas to provide more profits for the State. Unfortunately the deal failed between the two parties.
The deficit spending target was not met by the Government in 2011. There have also been some real concerns about corruption in Ukraine which has been one of the major factors for protest. Tax evasion and avoidance is also a real problem in Ukraine; half of their economy taxes and potential GDP have gone to underground trading fractions. In Yanuckovych’s presidency an estimated “$37 billion” had been lost due to tax evasion, tax avoidance and illegal trading.
In an economic sense Ukraine is at a crossroad, wherever to stay allied to Russia or to become more affiliated with the EU. With this in mind the Ukrainian executive must now look to the future on what it is right for their economy, the global economy and most importantly their people.
Even though Ukraine has lost out with the International Political Economy, it is in the hands of the Ukrainian people on which direction they take.