Zelensky economic advisor pushes back against claims of ‘Soviet-style ration cards’ for new food aid program

13 January, 01:57 PM

A debate over how to tackle rising consumer inflation is focusing on the wrong aspects, Oleh Ustenko, economic advisor to Ukraine’s President Volodymyr Zelensky, said in an interview on NV.Radio on Jan. 12.

The advisor pointed out that commodity and food inflation may rise to 20 percent this year, necessitating strategies for softening the blow for the population. However, he said he believed the Ukrainian media were paying too much attention to the form of a potential program, instead of practicalities.

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“If you look at it, all these waves of information have been utterly unconcerned with questions like where to get the money: they’ve have been utterly unconcerned with how to deal with inflation risks, and have been more concerned with questions of how to translate the phrase ‘food stamp,’” Ustenko said.

“On the subject of food stamps: it’s hardly Soviet-style ration books from the 1950s – this is a program where qualifying citizens would instead have funds deposited directly onto their debit cards.”

Oleh Ustenko, economic advisor to Ukraine’s President Volodymyr Zelensky (Фото: Oleh Ustenko/Facebook)
Oleh Ustenko, economic advisor to Ukraine’s President Volodymyr Zelensky / Фото: Oleh Ustenko/Facebook

Ustenko suggested that the soaring inflation rate is largely due to global economic trends, saying, “We’re entering a radically different world (of globally inflated prices) – something our president talks about in his speeches.”

Citing International Monetary Fund (IMF) data, Ustenko spoke about the global prices for commodities such as grain, sugar, cocoa beans, etc., rising by 10-20 percent in 2022.

“The (IMF) are warning of significant risks and challenges for emerging countries, and Ukraine is exactly one such country,” said Ustenko.

“Not to mention, we’re talking about what is known as ‘imported inflation’ meaning that we can’t tackle it ourselves with strictly monetary measures.”

Ustenko added that the government is now faced with developing a policy to deal with this unique economic challenge, and has to focus on both the ways to distribute financial aid to Ukrainians, and the ways to finance it.

Ukraine’s Cabinet of Ministers is already working on the finer points of such a relief plan, even if it’s a bit premature to talk about how much it will cost, Ustenko believes.

“I don't know what the Cabinet has in mind, but I think we ought to focus this economic relief on the most vulnerable social groups,” Ustenko said.

“(Lowering or suspending) VAT would be rather complicated, and would need vast bureaucratic efforts to enact; and what if the price shock does not materialize – we’d have to labor to roll VAT back in place.”

The advisor added that economic relief via VAT adjustment would “distribute aid evenly across the entire population, while we should perhaps look to the existing housing subsidy programs as examples of how to distribute targeted financial aid to those who need it the most.”

Ukrainian analysts forecast inflation at 6.7 percent in 2022, lower than the 10.2 percent seen in 2021, but food inflation that year reached 11.3 percent – with a 20-30 percent rise in staples like grain and oilseeds, Reuters reported.

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