Higher freight tariffs from Ukrzaliznytsia to hit economy and force businesses to close - ICC Ukraine

Ukrzaliznytsia's decision to raise its freight tariffs by 70% starting July 1 has sparked widespread concern among businesses and industry experts, who warn that the move will have a detrimental impact on the economy.

The International Chamber of Commerce (ICC) Ukraine has sounded the alarm, urging the government to reconsider the decision, which it says will lead to higher prices for goods and services, reduced competitiveness for Ukrainian businesses, and a decline in economic growth.

Impact on businesses

For businesses, the tariff hike will mean higher transportation costs, which will eat into profit margins and make it more difficult to compete in both domestic and international markets.

Some businesses may be forced to close down or relocate to other countries with lower transportation costs.

The ICC Ukraine estimates that the tariff hike will add an additional $1.5 billion to the cost of doing business in Ukraine, which will be passed on to consumers in the form of higher prices.

Impact on the economy

The tariff hike will also have a negative impact on the economy as a whole.

Reduced competitiveness for Ukrainian businesses will lead to a decline in exports and an increase in imports, which will widen the trade deficit and put pressure on the hryvnia.

The World Bank has warned that the tariff hike could lead to a 0.5% decline in GDP growth in 2023.

Call for government action

The ICC Ukraine is calling on the government to reconsider the decision to raise freight tariffs.

The chamber has proposed a number of alternative measures that the government could take to address the financial challenges facing Ukrzaliznytsia, such as reducing its operating costs or increasing its efficiency.

The ICC Ukraine also urges the government to provide support to businesses that are affected by the tariff hike.

Conclusion

The decision to raise freight tariffs by 70% is a shortsighted policy that will have a negative impact on businesses, the economy, and Ukrainian consumers.

The government should reconsider the decision and explore alternative measures to address the financial challenges facing Ukrzaliznytsia.