It is a worldwide practice that budget funds are distributed, fairly or quasi-fairly, by lobbyists. In our country this respected occupation is often left up to parliamentarians who, by force of their deepest feelings or corporate or political considerations, especially on the eve of an election, speak out in favor of or against a particular expenditure item. Valeriy Asadchev, the deputy head of the Parliamentary Budget Committee, recently played this role at a press conference. The gist of his statement was that national expenditures should be increased by two billion hryvnias, one for local budgets and the other for agricultural producers.
According to Asadchev, the reduction of taxes on natural persons’ incomes and the adoption of the Budget Code have in fact stripped local budgets of any self- rule. The main reason is the impossibility of adopting local budgets before the national one and a chronic shortage of money, as nearly all local budget revenues are used to pay salaries. Asadchev claims that cities’ current expenses now account for 81-90 percent of their revenues instead of the usual 75 percent. Naturally, with this kind of distribution this leaves no money for planned projects or urgent needs. In Asadchev’s view, the two billion hryvnias plus one already allotted by the government will cover these needs.
Budget problems slow down the development not only of traditionally subsidized cities but also donor cities, including our capital city. Speaking of the latter, Asadchev said the municipal authorities should somewhat curb their appetites when they distribute money. He says that funding Kyiv’s soccer club Arsenal, which has received UAH 50 million, is absurd because “in any case they won’t be able to rival Akhmetov or the Surkis brothers.” It would be much better to spend this money on building children’s playgrounds.
Does this mean that the problem is not inadequate funding but wasting money — both in cities and villages? Parliamentarians rarely discuss this issue. In their milieu it has become very fashionable in the pre-election period to talk about the need to support the countryside and agricultural producers. This talk has almost become an incantation now that Ukraine is going to join the WTO. “The WTO is a nice thing, it’s the most capital-intensive market,” Asadchev says, but our producers are not fully prepared to enter it. He says that only good governmental subsidies can save them from a likely glut of foreign food products, but the WTO favors just the opposite, i.e., subsidy cuts. Trying to run with the hare and hunt with the hounds, the MP is asking for the VAT problem to be finally resolved and farms allowed to pay again a single tax on condition that agricultural produce should account for 50 percent of their total output instead of the current 75 percent.
The question is how long the budget debate will last. The conflict between the executive and legislative branches may result in the failure to pass the budget, which will again worsen the business climate and adversely affect not just the countryside. According to Liudmyla Suprun, the head of the Parliamentary Budget Committee, if the budget is not passed, the parliamentary elections may not be able to start. This will be hardly a positive signal for domestic and foreign investors.
But in spite of all the snags, Suprun is certain that the 2006 budget will be adopted by the end of this year. “It will take just a little more time to win round [the government — Auth.],” she says. At the same time, speaking about his willingness to seek a compromise with the Verkhovna Rada on the budget issue, Finance Minister Viktor Pynzenyk noted that MPs should also show good will. If someone does not like the way the cabinet has distributed funds in the draft budget, they can suggest a different pattern of expenditures, but they should by no means forget about additional revenues. Pynzenyk also noted that failure to pass the budget will make it impossible to pursue a sound economic policy and solve social problems next year. He believes the cabinet will be unable to fulfill its plans of raising minimal wages and pensions.
Prime Minister Yuriy Yekhanurov is also taking a sound approach to the budget-passing process. “I am prepared for any outcome. The only question is the 2.5-2.6-percent budgetary deficit.” According to Yekhanurov, the president is closely monitoring the budget-passing process and backing his cabinet’s stand. This is heavy artillery, so to speak. So passions are running high. Will common sense prevail? In any case, the dispute must be settled before New Year’s Day.
