Western financial institutions punch away at what they call measures that turn back the clock to Soviet-style centralized market control
residential decree regulating the country’s grain market, discounting concerns that it represents a return to a centrally controlled market, a news report said.
Mykhailo Hladiy, deputy prime minister for agriculture, said he had met on Tuesday with U.S. Ambassador Steven Pifer and representatives of the World Bank and the International Monetary Fund to discuss the decree, issued by President Leonid Kuchma on June 29.
Hladiy said international financial institutions were worried that the decree would re-establish Soviet-type controls over the grain market and violate free-market principles, the Interfax news agency reported.
In particular, a letter submitted to the Cabinet and signed by representatives from the IMF, World Bank and US Ambassador Steven Pifer says that international financial organizations believe the President’s June 29 decree “threatens the process of reform.”
“We consider the presidential decree to be absolutely market-oriented,” Hladiy said. “It makes the market transparent, pushes away the profiteers who are reselling grain and, therefore, protects the producers and the investors.”
He said Ukraine had agreed to set up a working group on the grain market, which would include experts from international financial organizations.
To fulfill President Kuchma’s June 29 decree “On Urgent Measures to Stimulate Grain Production and the Development of the Grain Market,” the Cabinet passed four resolutions. These including a resolution on regulating the grain market and introducing a mechanism for state agent Khlib Ukraina to purchase grain at fixed prices.
In accordance with the decree, the state would buy grain from farmers at market prices, then sell it back to the farmers at the same price plus storage costs in the autumn, Ukrainian reports said.
But Financial organizations’ representatives are unhappy with granting Khlib Ukraina status as a state agent for regional orders.
“We have studied the decree and disagree with individual regulations…which need to be removed. In particular, in relation to Khlib Ukrainy’s status as a state agent, regional orders, and state interference to stabilize prices and restrict exports,” reads the letter.
The decree also calls for registering grain export deals. Authorities say the goal is to stimulate the market, keep bread affordable and avoid grain and bread shortages.
But agricultural groups say the measures are aimed at limiting exports and increasing domestic supply, which would drive down the price of bread to consumers.
On July 25, the government and representatives from the IMF, WB, and the US Ambassador discussed the problems in the grain market and listened to the financial organizations’ remarks on the state’s interference in its regulation. They agreed to jointly analyze the decree and the subsequent Cabinet resolutions before adopting a final opinion.
At the other end of the spectrum, traders and analysts have found the recent controversial presidential decree quite useful in pressing their case against grain shipment bans that have been arbitrarily imposed over recent weeks by local bosses in order to prevent the export of grain out of the regions.
This prompted the Ukrainian government’s response to scrap such bans.
Vasyl Soroka, head of the agriculture ministry’s grain markets department, told a news conference late on Tuesday that such bans on grain shipments had been imposed in the Luhansk region in eastern Ukraine and in Crimea, while analysts maintain that similar bans are in force in other regions as well.
“Nine regions are hit by poor grain crops this year, and they must have a chance to buy grain from 13 other regions rich in grain,” said Deputy Prime Minister Mykhailo Hlady.
“We have already warned all regional officials that such bans are inadmissible and illegal,” he said. “Such bans are a direct violation of recent presidential decrees and we will punish all culprits.”
Analysts say local agricultural bosses a shortage of bread-making grains this season and hope to leave as much grain as possible in regional stocks.
“Expecting a shortage of food grain later this season, regional authorities are trying to replenish their stocks with wheat, aiming to market it later,” said Serhy Feofilov, director of UkrAgroConsult agricultural consultancy.
“Regions expect that this season’s average grain prices will be much higher than last season.”
Traders say third-class wheat is selling at some Hr 700 ($129) per ton, against Hr 240 ($44) a year ago.
Ukraine, the breadbasket of the former Soviet Union, has seen its agriculture sector plunge since the 1991 Soviet collapse, with poor harvests pushing bread prices up in recent years.
