On September 20, the Verkhovna Rada Budget Committee considered the draft 2001 State Budget and determined the schedule for its passage by parliament. This actually begins the budget process for next year, which cannot be described as easy.
The proposed 2001 Consolidated Budget of Ukraine provides for balanced revenues and expenditures at UAH 52.3 billion, said Finance Minister Ihor Mitiukov. The draft budget was drawn up based on the 2001 real GDP growth at 4%, UAH 6.3/$1 average annual exchange rate, and 19% average annual inflation (previously the Ministry of Finance had proposed to set the revenues for the consolidated budget at UAH 47 billion and average annual exchange rate at UAH 6.7/$1).
According to Mr. Mitiukov, nominal GDP in 2001 will be UAH 190 billion, which means 2001 budget revenues and expenditures will make up 28.2% of GDP, which corresponds to the 2000 figures. The Finance Minister pointed out that the draft budget was drawn up using the existing tax framework. (At this point it should be noted that the President had previously said he would not sign the 2001 budget if it was formed using the old fiscal framework).
The draft document presented to Verkhovna Rada increases budget expenditures by UAH 3.9 billion over the previous year, of which 3.4 billion are appropriated for social needs. Of the 3.9 billion, 1.1 billion are redistributed budgetary sums allocated for various items, according to the minister. “We understand that wage and salary growth is insignificant, but we consider it to be a first step that is extremely necessary to make, because wages and salaries in these sectors have not been increased in the last four or five years,” he said.
The minister emphasized that they had managed to find an additional UAH 300 million to finance pensions paid by the state — here expenses will exceed UAH 1.3 billion, which will make it possible to completely separate Pension Fund expenditures from the budget.
Expenditures for servicing the national debt in 2001 are set at UAH 6.35 billion, UAH 4 billion will be to service the foreign debt.
Speaking about the domestically held national debt, Minister Mitiukov stressed that the lion’s share of UAH 1.7 billion will be made to the National Bank of Ukraine. He said that the government does not refuse foreign financing in 2001, primarily, within the framework of cooperation with the IMF and the World Bank, but he would not comment on all the details of his ministry’s strategy concerning international financial markets. As Interfax-Ukraine reported, the foreign debt of Ukraine as of July 1, 2000 was UAH 57.50 billion, or $10.58 billion at the official exchange rate, which is a $1.87 billion or 15% reduction since the beginning of this year (currently, the foreign debt equals about 40% of GDP). Simultaneously the domestic debt has grown from UAH 15.0 billion to 23.16 billion in six months. Significant debt growth was caused by the restructuring of the government debt to the National Bank. After the restructuring of the foreign commercial debt in February to April 2000, the main problem in servicing it is related to the repayment of $500 million to the Paris Club member countries in 2000 and 2001 and debts to international financial organizations.
During the elaboration of the 2001 state budget early last summer, the government forecast privatization revenues at UAH 4.5 billion, in August this figure was raised to UAH 6.5 billion, and finally 9 billion. In the minister’s words, “At the stage of economic growth Ukraine can attract considerably more [funds]... Such a task is quite realistic.” He also said a few words about the possibility to place privatization bonds on foreign markets.
It is not out of place to remind the reader that the state privatization program provides for privatization revenues of $1.5 billion in 2001 and $1 billion in 2002. Of that, 93% of the total amount of privatization sales will be transferred to the state budget. The law On 2000 State Budget sets the receipts from privatization at UAH 2.5 billion. During the period from January to August the State Property Fund transferred UAH 1.2 billion to state budget coffers, compared to 680 million for all of 1999.
Nonetheless, despite the encouraging macroeconomic prospects outlined by the nation’s chief economist, at this moment it is too early to talk about passage of the Cabinet’s version of the budget through the legislature.
