Finance Minister Ihor Mitiukov told lawmakers from the Verkhovna Rada tribune that the next year’s budget program would be deficit- free. The consolidated budget’s overall revenues would be UAH 521 billion (27.4% of projected GDP). Anticipated public debt payments will be UAH 12.4 billion, including 6.3 billion for domestic liabilities and 6.1 billion due on the public debt proper, at UAH 6.30 to the dollar exchange rate.
In Mr. Mitiukov’s words, social aspects were uppermost in the mind of the budget bill’s authors — social payments that will increase by 29% over the current year, a 25% wage-and-salary increment to people employed in the socio-cultural domain, and allocations to repay government debts to citizens losing hard-earned savings because of inflation, all totaling UAH 200 million.
The first day of the budget process, starting on October 4 and slated to keep Verkhovna Rada occupied for the next couple of months, ended with Premier Viktor Yushchenko taking the floor. He singled out ten key indices of the stated budget program that are expressly distinct from the previous one. The 2001 budget, according to Mr. Yushchenko, will make it possible to keep the public debt from growing, and that privatization proceeds will not be “eaten up.” It provides conditions for the pension reform, supporting the countryside, and securing social protection; it will be the first decisive step on the road of budget reform.
Most Solons, however, had different ideas.
Oleksandr Turchynov, chairman of the Verkhovna Rada Budget Committee, declared from the podium that 11 of 29 budget resolution clauses had not been complied with. “Given the budget funds being so dramatically limited, expenditure items must be provided for, otherwise the nation’s economy will not be able to function. This is particularly true of the energy sector; here nothing is provided by way of nuclear fuel reserve, power unit renovation or military security arrangements,” Mr. Turchynov stated.
Petro Symonenko, leader of the numerically strongest Red fraction in Parliament (114 Communist lawmakers), spoke strongly against the budget bill: “Unless the ideology and basic budget indices are altered, we will vote against it,” he is quoted as saying by Interfax Ukraine. Other factions are also against rather than in favor of the Cabinet bill.
COMMENTS
Anatoly KINAKH, NDP:
This is an extremely important period for Ukraine. We should not boast of any macroeconomic growth, because these indices, while they might look good, are very weak. Regrettably, they are rooted not in effective market restructuring, but in a positive world market situation that just happened to occur; after the 1998 crisis, some of our products meant for export became demanded on the market. Another reason is the hryvnia’s devaluation, thus raising our products’ competitiveness. Today, it is important to make every effort to solve our quality problems. Alongside the GDP increment, we are faced with unpleasant phenomena, such as worsening GDP and export structures, falling take-home pay, mounting accounts payable and receivable. Thus, we must have our budget, finance, structural, and investment strategies geared to solve precisely these problems. And to do so, we must also use budget regulators.
Unfortunately, I have to state that the budget now being deliberated by Verkhovna Rada repeats the shortcomings of the current budget program. Allowing for all the negative trends I have stated, the bill only reinforces these shortcomings. Among the reasons is the fact that this bill was drawn up relying on the existing tax system, which is a catalyst of all such negative trends.
This budget bill is anything but a reform one. It will assert very serious structural and qualitative drawbacks in our economy. We must do our best to make this parliament and Cabinet realize that a state constructing a faulty budget policy, burdened with an ineffective, over-regulated tax system, will never be a competitive world market operator. Lawmakers and top officials aware of the situation have to approach the issue casting away all political and ideological trifles. What we are facing now is determining Ukraine’s place in the world division of labor and international community of nations.
As for internal budget relationships, the stated bill copies a situation which is inadmissible, namely a hyperconcentration of resources at the center. This by no means corresponds to the content of our regional policy or the importance of an optimal coordination of the central and regional interests; [the current approach] proves a serious obstacle in implementing the regional development initiative, while unilaterally asserting undivided bureaucratic rule, along with other perils inherent in the hands-on implementation of the budget.
Viktor SUSLOV, SDPU(o):
In general, the current budget process looks rather conservative. The political novelty is its being drafted and presented by a government having a degree of parliamentary support. I think that the Cabinet has embarked on a course best described using the old adage of a bird in the hand being worth two in the bush. Evidence of this approach is found tax returns. The government plans to cancel a number of levies. Personally, I am convinced that sentiments in Parliament are more radical. Our People’s Deputies do not want the tax burden to be significantly eased. The Cabinet’s approach means that such burden-easing will mean increasing the budget’s fiscal deficit. However, there are a lot of other grievances against the bill from international organizations, which claim that overstated untaxed returns are a serious budget-implementation risk. For this reason lawmakers’ attempts to further ease the tax burden are not met with understanding by the Cabinet.. In my opinion, such conservatism by the executive is justified. Parliament would otherwise have to make substantial changes in the tax system, along with substantially easing the tax burden. This is highly unlikely, because it will cause a budget deficit, and we still have no real finance source to cover this deficit. Thus I personally consider this budget bill a conservative one with some reform added on for good measure. And this reformism is aimed in the right direction, but Parliament wants it to be even bigger and more resolute. As for 9 billion supposed privatization proceeds, I regard it as a quite overstated forecast. To make it come true, we need several preconditions. Given a favorable economic situation, the same property subject to privatization could cost more than in adverse economic conditions. Actually, this is another factor forcing the government and Parliament to look for joint possible solutions to improve Ukraine’s investment climate.
Viktor PYNZENYK, Reform-Congress:
A budget program can be described as normal only when properly balanced. Here lies the correct idea of a deficit-free budget. However, a deficit-free budget means than every item and clause is properly covered financially. What we heard today was what we must sell in order to get that 9 billion hryvnias. Less than half of the privatization proceeds anticipated this year (UAH 2.5 billion) has been received over the past eight months.
Another negative aspect is the conformity of budget funds to the real needs of all those budget sectors. And there is also a third problem of internal budget relationships. First, all of the regions must rely on budget subsidies. Second, all the old Soviet principles have peen successfully inherited and copied, year in and year out. Of course, I realize that no such system can be torn down and replaced overnight, but we can and must introduce regional responsibility, albeit experimentally. Thus the budget bill must be seriously clarified in order to pass.
Bohdan HUBSKY, SDPU(o):
If we really want all our social payments duly provided for, we must realize that all budget income items must be fully implemented. We are fully aware that any budget revenue reductions mean sequestering primarily social spending. For example, the bill stipulates the spending units’ staff pay raise by another 25%, yet inflation is 19.5%, meaning that this won’t be a raise but just another adjustment.
Also take savings bank deposit payments. A total of UAH 200 million is envisaged, yet only 65 million hryvnias has been paid this year, which is 33%. Last year, it was 5%. In other words, it is hard to guarantee that 200 million next year.
Now the budget revenue items. The bulk is made up of property privatization proceeds: UAH 9.2 billion. Just 200 million out of the planned amount of 2.57 billion has been implemented this year (a mere 19%). How can we be sure that eight times this amount will be collected next year? And this budget section is vital in terms of social payments. In other words, we are making social payments dependent of proceeds from the sale of public property, a budget item known for its innate instability.
If only all budget items could be trusted as fully conforming to our realities, one could describe the bill as quite a good one. We can no longer live on credit. Better receive less than stated, but knowing that the smaller amount is actually available. We must live in accordance with what we can actually make in terms of revenue.
