Last week Ukraine’s President Viktor Yanukovych tried to please the fair sex: at the meeting of the Cabinet of Ministers he shared the government’s impressing social commitments.
We would like to remind our readers that, according to the president, the improvement of living standards in this country should be guaranteed by the following steps. Firstly, the government undertakes to allocate a 1,000 hryvnias compensation for the citizens’ deposits in the former USSR Savings Bank (to those six million people who failed to receive the so-called “Yulia’s thousand”). Secondly, individuals who were pensioned off before 2008 are entitled to an average of 100 hryvnias increment to their pensions. And finally, on May 1 a mortgage program for affordable housing is to be launched, with annual interest rates of 2-3 percent payable over 10 to 15 years.
The implementation of these social initiatives (mortgage excluded) requires about 16 billion hryvnias, according to Vice-Premier and Minister of Social Policy Serhii Tihipko. He assured that state has got a budget for this: “As far as earnings and expenditure are concerned, we have fully taken these initiatives into account.” Tihipko even named the sources: introduction of the wealth tax, de-shadowing salaries and wages, decisions on offshore companies, and “a good dynamics of customs revenues.” The vice-premier assures that the government has no intention of printing more money, so no inflation is involved. The payments are supposed to be completed in four or five months. “If everything is done at reasonable intervals, price rise will be kept to a minimum. We planned this year’s inflation within the 8-percent range,” insisted Tihipko.
Ukraine’s Foreign Minister Kostiantyn Hryshchenko provided the government’s economy policies with a helping hand from China. “Ukraine apparently has a potential of an El Dorado in terms of investment,” he wrote in a newspaper article, arguing for the influx of Chinese investment capital to Ukraine. Hryshchenko is convinced that “we need not fear it [China’s investment capital. – Ed.], moreover, we should welcome it in any possible way as a factor which will add to our economy’s stability and confidence in the future.”
The National Bank of Ukraine, too, hurried to express its enthusiasm about the new initiatives. Its website published a commentary by Valerii Lytvytsky, director of the NBU advisor group. He states that this year’s first two months have shown a low level of inflation in Ukraine. “We believe that under such circumstances it is possible to continue a moderate policy of supporting economic activities and undertake another step aimed at decreasing [interest] rates.”
However, former deputy minister of labor and social politics Pavlo Rozenko is of the opinion that the National Bank of Ukraine will switch on the printing press in May. Besides, he admits that all of the government’s social initiatives have one target: the voters of the Party of Regions, i.e., pensioners, the military, and war invalids. According to Rozenko, “we saw something of this sort in the early 2000s, when the government first ‘froze’ all social standards for three or four years, and then, on the eve of the 2004 election, suddenly brought up the issue of pension and wage raise.”
Comments coming from the major opposition party are as uncomplimentary. The press service of Batkivshchyna party brands Yanukovych’s initiatives as “a campaign of electioneering and window-dressing” and hopes that “this time around, people will not buy the cheap tales of ‘improvement that starts today,’ and will sensibly deem Yanukovych’s initiatives as the work of the devil.”
The heads of Ternopil, Ivano-Frankivsk, and Lviv oblast legislatures (dominated by the All-Ukrainian Union “Svoboda”) promptly responded to the government’s intentions. They issued a statement, in which they raised strong doubts concerning the sources of all those promises. Also, they made some sensible offers, which the government should really take into consideration. In particular, they offered to create a unified state electronic register of citizens entitled to preferences, compensations, and other social benefits, and to toughen liability for illegal usurpation of the status of the benefit holder.
So far, the government has been losing information war. However, should it really desire to “hear everyone,” it could build bridges even with such implacable oppositionists as Svoboda. The support of expert circles might prove useful, too. For instance, Volodymyr Fesenko, director of the Penta Center for Applied Political Studies, will not dismiss the president’s initiatives as totally unfeasible. “I think it is quite possible to raise salaries and pensions,” remarks Fesenko. “The weakest link, however, is the implementation of the housing program.”
Yet the State Hypothec Agency deems the mortgage housing program with 2-3 percent annual interest rate quite feasible. Viktor Myrhorodsky, chairman of the board of the State Hypothec Agency, admits that mortgage credit rates can be lowered by increasing the authorized capital stock of the Agency.
COMMENTARY
Ella LIBANOVA, director, Ptukha Institute of Demography and Social Studies at the National Academy of Science of Ukraine:
“In my opinion, the social initiatives announced by President Viktor Yanukovych can rely on economic growth, as well as on pushing up wages. Unfortunately, whatever reserves to raise wages we used to have are now exhausted, and they were never properly used, actually. Therefore, today this mission can only be accomplished as the result of increased working efficiency in the real sector. Without economic growth these initiatives will remain castles in the air.
“Among all of the social initiatives, raising pensions and sorting out the system of benefits should be top priority. As far as the mortgage credit goes, I cannot be a judge, since I have a vague idea of the proposed refinancing interest rates, deposit rates, credit rates, and so on. The only thing I am perfectly well aware of is that the difference between mortgage credit and general credit cannot be too big. Inflation rate plays a very important role, too.
“This is not the first similar initiative, but before Yanukovych no one had launched tax or pension reforms on the scale it was done in 2003. A very important step was taken then, but nothing followed. So maybe, the new government will successfully implement these initiatives.”
