The Cabinet of Ministers of Ukraine held an enlarged meeting September 8, attended by President Petro Poroshenko, Speaker Volodymyr Hroisman, and heads of oblast state administrations. Announced last week, the meeting was to discuss ways to have three bills (on the terms and conditions of restructuring the foreign debt, to be agreed upon with the creditors, on the raising of the social [living] standard, and on amendments to the Code of Criminal Procedure to confiscate some $1.5 billion worth of funds and securities owned by ex-President Yanukovych’s inner circle) passed by parliament as quickly as possible. Also on the agenda were issues pertaining to mobilization, measures to enhance government control, defense potential, and civil defense.
As it was, the meeting began by broaching a political subject: Coalition, whether or not it would survive. President Poroshenko said he was sure the existing one was the only option: “An attempt by one of the Coalition members to topple it has failed. Four political forces have confirmed their determination to work for the good of Ukraine.” He added that he would meet with the coalition members within the next couple of days “to get a second wind in this joint marathon.” The head of state promised he would support Prime Minister Yatseniuk’s cabinet membership changes, should the Coalition or the Cabinet make such a decision: “That’s your call [addressing the prime minister. – Author] and that of the Coalition and the Verkhovna Rada, but we must secure effective cooperation.”
After that the Cabinet meeting considered economic issues. Finance Minister Natalie Jaresko informed that the 2016 budget bill was being drawn up proceeding from the UAH22.4/$1.00 exchange rate. The second IMF loan tranche of some $1.7 billion, due in October, would reinforce Ukraine’s economic rear lines. The president asked the Verkhovna Rada to pass the higher (by 13-8 percent) social standard bill. The changes under the bill will affect 80 kinds of social payments. Most importantly, the living wage will amount to 1.33 thousand hryvnias. According to Social Policy Minister Pavlo Rozenko, over 12.5 million Ukrainians will benefit from the social standard bill [when passed by parliament].
Speaker Hroisman assured those present that the Verkhovna Rada would deliberate the social bill and those on the restructuring of the foreign debt, visa-free regime, institution of the Anti-Corruption Prosecutor’s Office, etc., during the next plenary session. Interestingly, he either forgot or thought it best not to mention the bill on the confiscation of the political refugees’ [Yanukovych and his inner circle’s] property.
The officials representing the three branches of power posed for the media cameras and spoke about their lawmaking plans. Why such pomp? The prime minister said last week that the social standard would be raised and the finance ministry reported arrangements with the creditors two weeks ago. What was new about the Cabinet meeting? Was it to convince parliament that the bills had to be passed? There was no need to do so. With the local elections getting closer, no political force would be likely to oppose an increase in social payments or ways to avoid default and return what was stolen from the central budget by the previous head of state and his henchmen. Why stage the show?
Says Andrii BLINOV, economist, coordinator, Project “Successful Ukraine”: “That’s a smart election campaign stunt. Passing the bills on social payments and restructuring of the foreign debt isn’t crucial for keeping the Coalition in one piece. All these bills are presented to the public as signs of victory. Who would be against them? That’s politicking for all it’s worth. They must’ve agreed on making this ‘victory’ look as though it were a common achievement, not as that of a single person like Arsenii Yatseniuk or Natalie Jaresko, so all Coalition members, the Cabinet and the President could capitalize on that before the local elections. That’s why this is portrayed as a result of combined efforts on the part of all branches of power.” The expert adds that their desire to share the “victory” on equal terms and the subsequent delay in passing the bills are damaging the country. The social payments were to be increased starting September 1, but parliament will put the bill to the vote next week, at the earliest, and the bill will take effect on September 15, at best: “This is a serious issue for social services that have already begun to accrue social payments for September. They don’t know what to do under the circumstances.”
Blinov believes that the government is facing a serious problem, which is being ignored with the local elections approaching – namely, economic growth: “There are no investors, privatization is slowing down for a number of reasons; international investors are sending money; the government is taking some steps, but there is actually no economic recovery. No progress in the stabilization of the hryvnia exchange rate.”
Instead, there is every reason for the inflation rate to be on an upward curve. Valeria Hontareva, head of the National Bank of Ukraine, broadly hinted at it during the last meeting of the Financial Stability Council, saying that social payments are good, but that there is money accumulated on the National Treasury account, that this money may well spill over to the domestic market through the Individual Deposit Guarantee Fund or as utility subsidies. In other words, NBU wants to hear the Cabinet’s opinion on ways to keep the inflation rate within reasonable limits.
Experts say the only way is by carrying out reforms. Has the government made any progress here?
Blinov says there is little to write home about, that reforms are being made but at a snail’s pace.
The expert sitting in the Central Office of the World Bank (Ukraine’s second most important international financial partner after the IMF) in Kyiv told The Day that there were signs of improvement in the domestic economic situation, but that the process was too slow: “We see no progress in the struggle against corruption. It has infiltrated into all areas of life… There aren’t enough reforms in the fiscal sphere.” He added that an effective fiscal reform doesn’t always require lower tax rates: “It would suffice for Ukraine to upgrade tax administration and effectively use transfer pricing to finally collect taxes from the oligarchs.” The World Bank had actually recommended that the Cabinet do the privatization campaign on a selective basis, taking its time in regard to certain assets, especially the largest one, Odesa Portside Plant: “First, transparent privatization procedures and creditors’ terms and conditions have to be worked out, to prevent the oligarchs from joining the competition under the guise of some foreign firms.”
Reforms carried out over the past two years have to be confirmed by their results in terms of actual economic recovery, rather than nominative per capita income growth. Nothing has been done there after the Maidan. Instead, we’re witness to a lowering GDP. There is no telling whether the economic recovery promised [by the government] for 2016 will take place. That’s the biggest problem!” says Blinov.
In other words, official Kyiv is still actively applying the principle of political expediency in managing the economic process – instead of relying on the trust and maximum support Ukraine received from the international community after the two Maidans. Ukraine’s current political leadership received unprecedented instrumental support from their global partners, but they have busied themselves with spin doctoring from day one, instead of putting together a reformer national team. As a result, the national economy is on a downward curve and the domestic oligarchs are into an obviously sharper phase of their blood feud.
