Troika of state-controlled banks slated for privatization

The National Bank of Ukraine plans to privatize state-controlled banks. Economists think the share of state-run banking system should not account for 60% in the context of a market economy.

Reportedly, Ukrgasbank that has been 95% owned by the state since 2009 will be the first to come under the hammer. This financial establishment is seen as a very attractive asset, especially for Ukrainian investors. Analysts do not rule out a possibility that international financial institutions may well bid for a share of the Ukrgasbank's pie.

In addition, the sale of 25% of shares of OschadBank and Ukreximbank is now under discussion. However, privatization of PrivatBank has been postponed because it is not cleared of litigating claims laid by former shareholders and creditors.

According to Paul Craig Roberts, chairman of the Institute for Political Economy, when the country is unable to service loans, creditors send the IMF to tell the indebted government that the fund will protect the government’s credit rating by lending it the money to pay its creditors. The money saved by reduced social benefits and raised by selling off the country’s assets to foreigners serves to repay the IMF. This is the way the West has historically looted Third World countries.

Observers agree that using privatization to cover a short-term budget problem creates a larger long-term problem. The profits of Ukrainian enterprises would flow out of the country, reducing the grivna’s exchange rate. In effect, allowing foreigners to acquire Ukraine’s national assets helps them to speculate against the grivna.