Ihor YUSHKO: No Financial Privileges for Election Campaign

The Yuletide appointment of People’s Deputy (Party of the Regions) and member of the NBU board Ihor Yushko as Minister of Finance was a significant event in this country’s political and economic life.

It is too early to make any conclusions about this new figure on Ukraine’s financial and political Olympus. Many consider him a rising star among the nation’s financiers. The newly-appointed Mr. Yushko is exercising utmost political caution, trying to refrain from abrupt public moves. He might indeed be just getting the picture, he told The Day. Or perhaps the new minister really wants to protect his office from the attacks of lobbyists in a heated campaign period. But it seems that the minister will sooner or later have to choose what is better – to have neither friends nor enemies or to have influential allies and equally influential adversaries.

“You were only recently a Verkhovna Rada deputy and took part in the budget process. Now you are the minister of finance and supposed to fulfill the approved deficit budget. Have you changed your attitude toward this document? Is it realistic to fulfill it?”

“I must note that the Cabinet of Ministers has far more information than the deputies. Serving on the parliamentary Committee for Finance and Banking, not that on the budget, I accordingly dealt professionally with issues of the tax system, financial markets, and others, which are a no less important component of the Ministry of Finance routine than the budget is. I will say frankly that the period (a little over a month) that I’ve been working as minister of finance is insufficient to fully understand such a document as the budget. I have not yet made any final conclusions even for myself about budget fulfillment. Final conclusions will perhaps be possible in the middle of the year. This is exactly a span of time one needs to say for sure what the 2002 budget is, what are its advantages and deficiencies, etc.”

“What about election spending?”

“I can say that nobody keeps the money. There are no privileges for any sectors or programs, although we place social expenditures above everything else. But this year’s first quarter is somewhat special. The election campaign is underway. The law requires that the budget allocate the not small amount of UAH 320 million for the Central Electoral Commission. This is an additional strain, but it will vanish in the second quarter. This is in fact the only privilege you can mention in the first quarter. We try to finance uniformly all other things, being aware that 90% revenues are not enough to provide for all expenditures at a 100% level. Yet, we have another three quarters ahead of us. We have perhaps not the confidence but a hope that we’ll be able to rectify the situation, i.e., to regain what we lose early this year. We have done so previously.”

“When do you think the new Tax Code will be passed? After being substantially revised by Verkhovna Rada, this document has caused a mixed reaction among entrepreneurs. In particular, they pointed out that the reduced basic tax rates would be offset with the increased number of local payments. What kind of tax policy is the government going to pursue this year?”

“As to whether the bill will be passed, I can say that I don’t have any crystal ball, nor do I know how to read on tea leaves: this is not my department. Therefore, it is difficult for me to speak about this document’s destiny. It will depend in a way on the parliament that will start work in May, on whether a majority will be formed, and on the way the latter will treat this document. Should it be treated constructively, we will be able to speak more realistically about the draft Tax Code’s prospects sometime in the fall. Undoubtedly, the new parliament will have many new deputies who will have to study the draft more attentively. This will surely take some time. Thus not to miss 2003 as the year of tax reform, we are working out today not only the code but also some tax regulations, which Verkhovna Rada will find it easier to deal with. Please don’t take this as an alternative to the Tax Code: this only develops the ideas incorporated in it.”

“Does this mean tax cuts?”

“Yes. We are very actively working for this, but this is not our only goal. A few task forces have been set up to forecast the financial and social consequences of the tax reform. I see that this is not an exhaustive answer. There have been so many task forces before... Yet, our intentions are serious.”

“Are you afraid of the much talked about the campaign risks for the economy?”

“I was asked this question in New York at the Economic Forum. I answered that I saw no fundamental pre-election risks for the economy and finance. I hope the next parliament will form a majority that will constructively cooperate with the executive branch.”

“Would you comment on the recent statement by Viktor Yushchenko, supposedly a convinced monetarist, who suddenly said that the hryvnia rate runs counter to existing economic realities?”

“I don’t know what kind of information Mr. Yushchenko used, for I never spoke with him on this. Of course, I’ve heard about this statement, and I will say as an NBU board member that I see no reason why the hryvnia should be devalued, at least in the immediate future.”

“How long does at least mean?”

“At least, until the middle of this year.”