In 2007 Ukraine’s state budget deficit will match or even surpass this year’s, First Deputy Finance Minister Viktor Kalnyk told a press conference.
Allowing for all duly approved proposals concerning increased spending and easier tax burden, the finance ministry predicts that it will be necessary to “find” another 69 billion hryvnias in the 2007 state budget. Moreover, after the new cabinet is formed, the finance ministry will define the macroindices more exactly and Naftohaz Ukrayiny will specify the natural gas price-setting prospects. Kalnyk believes that this year’s budget may be revised; considering the bills passed by parliament (the Law “On Children of the War” being the most burdensome for the budget), another 23 billion hryvnias will have to be found in the 2006 state budget. This sum includes parliament’s decision to ease the tax burden by 6.2 billion hryvnias and make additional appropriations, mostly in the social sphere, to the tune of 17 billion hryvnias.
Among the lesser risks is the annulment of the cabinet resolution on payments for water. This will deprive the state budget of 500 million hryvnias. Approximately 300 million will be lost due to the lower oil extraction and processing rent. Kalnyk says that the income tax and net income tax were not levied on state enterprises during the first quarter of this year; they were blocked by certain ministries. These taxes would provide 2.6 billion hryvnias. Add here the 13.9 billion worth of budget deficit determined by the legislators.
If this money — or at least a considerable part of it — is not found it may cause budget deficit to increase by seven percent GDP, Kalnyk said and made an unpleasant assumption: “We may have an inflation like the one in 1994- 96.” He added that these risks can be avoided by postponing the implementation of a number of new social initiatives and that some of them should be canceled because finding the required sums during three quarters is unreal. It should be noted that this year’s budget incomes are planned in the amount of 125.7 billion hryvnias whereas spending will amount to 138.2 billion.
The finance ministry, however, remains calm. The state budget plan for the first quarter of the year has been fulfilled. Even though there is a cash gap tentatively estimated at 20-25 percent, Kalnyk says, “I’d recommend Ukrainian citizens to remain calm.”
Telling the Ukrainians to remain calm, the financiers refer to the 2005 experience when the money received by the finance ministry was channeled into 41 budget programs of which 13 were of national importance. Appropriations for the national programs amounted to 83.4 percent of the whole budget.
Among the ministry’s top priority programs remains the servicing of the internal and foreign debts. The finance ministry has succeeded in lowering the cost of loans and replace old debts with new ones that are more advantageous to Ukraine. In fact, appropriations for the servicing of the foreign debt amounted to two billion 138 million hryvnias and the economy of budget money to 31.7 million. According to the finance ministry, the overall cost of servicing the internal and foreign debts has decreased by seven billion 255 million hryvnias.
Kalnyk reminded those present that in 2005 494.1 million hryvnias were channeled into compensations for citizens’ devaluated savings (but the depositors are not satisfied with the rate at which these debts are being repaid and picketed the National Bank of Ukraine that same day).
The government, however, cannot be accused of failing to support the state banks. This year the State Savings Bank and the State Export-import Bank have improved their conditions at the state budget’s expense. Accordingly, four and three million hryvnias has been channeled into their authorized capital stocks.
The finance ministry considers last year successful but has nothing encouraging to say about the next year’s prospects. Most likely the budget will be balanced again at the expense of privatization. This time Ukrtelecom looks the most sellable of all.
