You're reading: Subsidizing interest on loans more efficient than paying people to buy Ukrainian cars, says banker

The idea of paying Ukrainians to buy domestically made cars, being developed by the Ukrainian government is unrealistic, given the growing deficit of the national budget, and subsidizing interest on car loans would be more effective, Deputy Board Chairman of PJSC AVANT-BANK (Kyiv) Andriy Shvets has said.

“According to the Finance Ministry, as of July 1 the national budget deficit was Hr 22.5 billion, and there are not enough funds for the main expense items, to say nothing of other investments. The automotive lobby is trying to invigorate the domestic market of national car purchases. But the proposal to pay to citizens to buy cars is expensive for the state – it is much more effective to foresee funds for subsidizing interest rates on loans,” reads a bank press release, citing Shvets.

He said that in this case the resource potential increases significantly. In addition, there is no need to create another bureaucratic mechanism that will decide when, to whom, and how much to pay, as the banks will do everything themselves.

“We can pay $1,500-2,000 for the purchase of one national car, but we can use these funds to pay subsidies and reduce the interest rate for many buyers. The effectiveness of spending public funds in such a case will be several times higher. The interest rate could be reduced to 7-10% per annum for loans in the national currency. Buyers will have a choice – to purchase a foreign car at average market interest rates of 20-22%, or a domestic car at a much more favorable rate,” said Shvets.