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Ukraine’s Dollar Addiction

KYIV – Inflation in Ukraine is skyrocketing. By March, it reached 26% per year and continues to rise. Although prices are increasing around the world, Ukraine’s inflation is extreme, twice as much as in neighboring Russia. Amazingly, instead of dampening inflation, Ukraine’s central bank is stoking it.

Ukraine’s prices started spiraling out of control around the time when Yuliya Tymoshenko returned as prime minister last December. Malicious observers suggest that she is to blame for pursuing populist social expenditures. But this is false. Her government actually tightened the budget just before New Year. Indeed, Finance Minister Viktor Pynzenyk reports that the state recorded a budget surplus of 0.6% of GDP during the first quarter of 2008.