Monday, February 4, 2019

Inflation in Ukraine

The chart below is translated from Ukrainian and USD information was added.  I can't find the original source now, only others who have referenced it. It gives an idea of the price increases over 5 years both in local currency which are huge and in USD which are not so big.  The main problem is the price of natural gas.


Ukraine is highly dependent on IMF financing until the country gets its act together.  Being invaded by Russia in 2014 did not help and has been used as an excuse to drag out essential reforms. Ukraine has long subsidized gas prices. The IMF in its usual attitude of people be damned insists Ukraine start charging the going rate for gas. In September of 2018, Ukraine paid $304.40 USD per 1000 M3 for imported gas which is about 8.43 UAH. Becoming very rich necessitates involvement in the gas trade.  Billions are made between Naftogaz imported price and the consumer by the gas distribution companies as the government makes up the difference to Naftogas between what they spend on importing gas and what the distribution centres pay them.  To give credit, the country is working hard to clean up the corruption but the distribution centres are fighting back.

Our normal daily gas consumption to heat our house is about 16 M3. This winter it is 24.  We don't know why as we are not there. Katya has the heat turned down upstairs and the house is cool. There is always the suspicion that they are diluting the gas with something but I do not know if this is even possible or simply urban legend.  Our house, like all buildings in Ukraine, is not insulated, merely thick walls of masonry.  Our windows are relatively new but need readjusting to tighten better.  What we have under our roof is a mystery to me. So it is costing us 24 M3 X 30 X 8.55 = 6156 UAH per month or $222.00 USD.

Apartment blocks are centrally heated and charged a flat rate per M2.  Lina's flat is about 30M2 which is quite small and she pays 30 X 50 = 1500 UAH per month or $54 USD. But she has no control over her heat. It is sometimes too hot or ice cold. She only has heat from mid-October to mid-April. She cannot put in her own gas furnace with hot water heat unless every person in the building does.  Which cannot happen.

Here is why the inflation, especially of gas prices is so devastating. according to Ukrainian legislation, for persons over the age of 65, the minimum age-based pension is 35 years for men, while for women, 30 years. Pension is set at 40% of the minimum wage. 

  • 40% of retirees in 2017 were below the poverty line; 
  • 2,5 thousand UAH - average pension in Ukraine;
  • 1497 UAH - minimum pension.

Compare minimum pension with the gas price for a small flat. there is nothing left. Theoretically, the government is to make up the difference in gas price by raising pensions and social assistance.  It is, of course, never enough to actually cover it.

10 comments:

  1. Wow, what an eye-opener! The heating system in the dorm rooms in Tache Hall at the U of M used to be similar to Lina's flat, but at least they always erred on the side of "too much heat". Even when it was -40 out, we usually still had our windows open. That's the last time I was ever at the mercy of somebody else's heating choices, and I hope to keep it that way.

    So... what's with the huge increase in the price of buckwheat? It inflated at twice the rate of beef?!?

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    1. I wondered that myself. Buckwheat is a staple food, like potatoes here. Likely production is down as other crops are more profitable.

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  2. "40% of Minimum Wage" Ouch. Especially given that from what I gather Minimum Wage is about 4723 / month or $173 US. That comes out to about $63 /month US. Damn.

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    1. You pretty much understand the situation with pensioners. Many live in abject poverty. If they live in villages they can still grow garden but if they live in a flat in town they are in bad condition. The lady who lives below Andrei has sold most of her possessions to buy medicine

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  3. My goodness, these prices are going through the roof – what an increase. Now with climate change, extreme heat and cold weather will be more usual. I feel bad for the pensioners in your country.

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    1. Pensioners and poor are in a bad way. It is even worse in Russia.

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  4. All this on top of salaries that probably aren't three times what ours are. It makes a person wonder haw they do it. Pensioners are screwed.

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  5. Have you thought about staying here in Canada and not going back to those prices in Ukraine? Those prices are dreadful. And will keep going up I;m sure.

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