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Ukraine PM sees progress despite steep price rises

Ukrainian Prime Minister Yulia Tymoshenko, battling steep price rises, said on Wednesday inflation would be under control by mid-2008 after the latest monthly data which she saw as encouraging.

Tymoshenko returned to government in December after a brief stint as premier in 2005, when she earned a reputation for economic populism, and has already been rapped by several international institutions for her cabinet’s lax fiscal policy. But she said, data showing month-on-month inflation had slowed to 2.7% in February from 2.9% in January boded well. “We will continue to work on this trend in the future, so that by the middle of the year, we can overcome this phenomenon and put inflation in its place,” Tymoshenko told a regular cabinet meeting.

The government has insisted on its 2008 inflation target of 9.6% despite a 16.6% rise in 2007 and an annual figure of almost 20% in January. Inflation in the first two months of this year amounted to 5.7%. Local and international analysts predict 2008 inflation at between 12-16% and both the central bank and President Viktor Yushchenko have poured scorn over the government’s ambitious target.

But Economy Minister Bohdan Danylyshyn told Reuters on Wednesday, that “coordinated action from the government, the central bank and goods producers could yield the expected results in the near future”. Inflation in Ukraine, following a regional trend, rose steeply last year after a devastating drought pushed up food prices -- food staples account for about 50-60% of the consumer price index.

The central bank, meanwhile, has sent out mixed messages about a possible revaluation of the hryvnia currency, which it has kept in a 5.00-5.06 band to the dollar, within a stated wider target of 4.95-5.25. The bank’s executive director on economic issues, Ihor Shumylo, said in January the bank was considering altering the exchange rate policy as part of a package of anti-inflation measures. However, the bank’s council head, Petro Poroshenko, dismissed this idea last month. He also sounded a pessimistic note on the government’s inflation target, saying: “You will not stop price rises without some kind of miracle”. (Reuters)