Presidential social initiatives could cost up to UAH 16 bln

Deputy Prime Minister Sergiy Tigipko estimated new social spending initiatives announced by President Viktor Yanukovych at up to UAH 16 bln (USD 2 bln), Interfax reported last week. Yanukovych asked for the minimum monthly pension (UAH 822 currently) be increased to UAH 100 to Ukraine’s 9 million pensioners that retired before 2008, called for paying back up to UAH 1,000 to depositors that lost money in the Soviet Savings Bank (Sberbank), among other initiatives.

Brad Wells: The president’s initiatives have an obvious populist overtone and are clearly designed to win votes for his political party in the upcoming parliamentary elections in October. Estimated additional social outlays make up 4.5% of the current 2012 plan and there is little clarity yet on the sources for financing these initiatives, though Tigipko said it could come from increasing revenue from customs or the introduction of a luxury tax. In our view, the new social initiatives and reluctance to hike gas tariffs for households make resumption of the Ukraine-IMF standby program impossible.