Fight for posts and capital heats up

The week before the last during the discussion about the state budget, Verkhovna Rada Speaker Oleksandr Tkachenko, obviously trying to inspire prudence when voting “for” the budget, reminded the deputies of the sad budget statistics: since state revenues have stopped drawing inexhaustible printing press resources, the budget has not one time been fulfilled at more than 70% or 80%.

The effort to level planned receipts and expenditures with realistic ones, which was quite logical given such indices, turned out to be impractical. At the repeated first reading, Verkhovna Rada adopted the 2000 draft budget as amended by the Budget Committee. This draft budget provides for UAH 40,750,712,000 in revenue, which is 50% more than the draft proposed by the Cabinet. The adopted draft has been developed on a no-deficit basis, rather than the surplus one proposed by the Ministry of Finance. According to Budget Committee Chair Yuliya Tymoshenko, “The positive vote for the conclusions and proposals of the Budget Committee is the Rada’s colossal victory. In the second reading, the budget will not be seriously amended. This means that we have implemented a good regional policy, formed realistic revenue and expenditure items, and come up with a zero deficit. And in the future we will work further according to the procedure determined by Verkhovna Rada.”

The interesting point is that former businesswoman Tymoshenko knows only too well that excessive drawing of money from taxpayers and its further redistribution through the budget, inter alia , for investment purposes (but now she would not actually mind spending the money on certain other things) always suffocates the economy, especially, to a new one business, which is not connected with the powers by linkages of corruption, because this is always misappropriation of money. And now that Tymoshenko is heading a basically Left majority in Verkhovna Rada (because only the Left can complain about the inability to collect more than 70% of planned taxes, and at the same time demand their increase), enacting the budget this year will be again an instrument of political blackmail (and, in the future, theft).

On December 2, an IMF mission will visit Kyiv. Presidential aide Valery Lytvytsky said the key issues to be discussed in the negotiations will include the adoption of the 2000 budget and acceleration of structural reforms, especially institutional ones. Thus the supposedly pro-presidential majority of Verkhovna Rada has laid its own claims both on political power and participation in the distribution of budgetary resources. It should be noted that the only way to combat the private use of public money is to make the budget a financial (realistic and transparent in implementation) document, rather than to strengthen police functions of the authorities.

On the whole, such a hypothesis (of the budget as an instrument of those separated from distribution) does not contradict economic theory, according to which any decision which cannot be justified economically, (that is, economically ineffective or unfeasible), is exclusively political. In our specific case, this is the fight for posts and access to power as capital.

THIS IS HOW THE RUSSIAN MAGAZINE EXPERT COMMENTS ON THE POST-ELECTION SITUATION IN UKRAINE

Most probably, the existing state structure and political system in Ukraine will be preserved and strengthened. In other words, all important political decisions will be influenced by secret fights between clans, while political parties and ideologies will turn into nothing but than an decorative element on the facade of the pyramid of power.

There is no doubt that Ukraine’s foreign policy will be determined by economic factors. The country is verging on bankruptcy, the hryvnia’s exchange rate began to fall even before the second round of the elections, and, as predicted by observers, could finally collapse in the near future. Ukraine is fully dependent on foreign energy supplies. Hence, one can expect that the multivector policy — where the state tries to please everybody — will be continued.

As for the West, its relations with Ukraine have been set long ago: Kyiv pretends that it is carrying out reforms, adopts various declarations about democratic transformation, and surreptitiously misappropriates foreign loans. Meanwhile the IMF continues to finance its inefficient system and pretends not to see how it is being duped. In exchange, the West has received Ukraine’s support on such strategic issues as, for example, NATO’s eastward expansion. In accepting this, Ukraine has agreed to its own gray zone status, opposed by all Ukrainian politicians several years ago. Soon, Ukraine will probably have to “overlook” the closing of the borders with neighboring nations preparing to join the European Union.

Simultaneously, Kyiv does not risk showing its convergence with Russia, having reasonable apprehensions that the West will stop giving it money. Consequently, Ukrainian-Russian relations will develop veiled and without neckties. However, economically insolvent Ukraine has been gradually losing its arrogance of “statehood.” As soon as next year, a number of strategic Ukrainian enterprises and even whole sectors will be handed over to Russia as payment for debts. Even a year ago such a supposition would have been considered sacrilege, but now it is only a trend.

Proceeding from the existing situation many political analysts predict for Ukraine a repetition of the Bulgarian scenario. They think that in about a year, when the economy will be destroyed completely, the people will understand the fallaciousness of the current course and the error of their own choice. According to such scenarios, the next presidential elections will be held prematurely, in one or two years. There is only one reason that can be used as an argument against such a conclusion. Ukrainians are infinitely patient, they do not like changes to such an extent that in 1999, having not been paid their wages, salaries, and pensions for over a year and a half, they still voted for Leonid Kuchma, saying, “There has been no war under his rule,” “He has already stolen enough, but a new one will start over stealing.” On the eve of the elections, Kuchma himself ardently assured the voters that in the past five years he “has learned everything and has only just felt himself President” and thus will finally begin to work.

COMMENTARY

Larysa LESHCHENKO, economist

“Indeed, the current task is to find economically justified ways to spend budget resources. In this country many attempts have been made (and often, quite successfully) to redistribute budget funds for the benefit of certain quite influential industrial groups which have their representatives in Verkhovna Rada. Although they are not subsidized directly from the state budget, they receive support in the form of tax privileges, and some of them do not pay taxes at all. This undermines the fundamentals of competition, which normal societies should have in place. No firm paying all the taxes due is able to compete with a monopolist that was granted tax relief due to its levers. The budget should be a document which, on the one hand, addresses specific economic tasks of the present day and is used as a mechanism encouraging the development of certain fields of activity, and on the other hand, it should settle the problems relating to the social security of people who belong to the poorest strata of the population. And it should be transparent and based on a special method of preparation, which would indicate the defined priorities of the society and demonstrate how they are implemented.

“With us, everything is usually determined in some official offices or entities, which are closed not only to the public, but even to the people involved.

“Naturally, the result will be like always. On the one hand, the revenue provisions of the budget will not be fulfilled to a fully, and hence the expenditures won’t be either. For instance, last year additional revenue sources were adopted. It was announced from high platforms that there would be no end to revenues, which could be easily used, but then it turned out that the “sources” were empty. Actual revenues amounted to only 6% or 8% of the targets. The budget should be a balanced document where expenditures cannot exceed receipts. If the latter is less, the question arises where to cut, in what programs? But there are living people behind those programs, for whom social security, public health, education, and other programs are working. In other words, we see that an unrealistic budget forces us to make painful decisions, while to blame is the person who decided in his or her own way: who should get something and who should not. This, to put it mildly, is the fallacy of the current situation.”

INCIDENTALLY

The Monday before the last, Deputy Speaker Viktor Medvedchuk noted at a Verkhovna Rada briefing that the main provisions for 2000 budget has not been incorporated yet, although the document was adopted by Parliament in the first reading. According to the Deputy Speaker, there is “an interesting psychological collision” with regard to the budget. “On the one hand, the Parliament’s Budget Committee maintains its position and is suggesting that revenues in the 2000 budget be increased by UAH 15.1 billion, and on the other, the government represented by the Ministry of Finance partially agrees, attempting to adopt the budget in due time... The government should firmly uphold its stand when debating the draft budget, rather than make statements about the impossibility of implementing some item or another, which is the case now, when Verkhovna Rada has already adopted its decision.”

Obviously, the government’s uncertain position can be attributed to a visit of IMF Managing Director Michel Camdessus to Ukraine slated for December 15-16.

According to Premier Valery Pustovoitenko during his visit Camdessus will discuss with President Kuchma the strategy for further cooperation between the IMF and Ukraine. He said that without the EFF Ukraine will not be able to negotiate the restructuring of its foreign debt, and it would thus be advantageous for the state [Ukraine], if the IMF resumed the EFF suspended in late September. The results for last October show that Ukraine failed to meet a number of financial targets set by the EFF, in particular, it exceeded the limits set for its budget deficit and National Bank’s assets, reports Interfax-Ukraine.