The President's somewhat labored message to the Verkhovna Rada, which
only last Wednesday threatened a failure, did not turn out to be anything
to write home about.
To begin with, Mr. Kuchma finally had to render an almost objective
assessment of the economy which is falling apart before our very eyes.
Perhaps for the first time the Chief Executive admitted to the artificial
hryvnia rate and almost acknowledged the dominance of domestic causes for
the ongoing crisis over foreign ones. Considerable room was allocated to
financial policy and once again the Guarantor of the Constitution could
not but lash out at Parliament, opposing an emission. His speech writers
gave him the traditional concepts about the need to reduce the budget deficit.
He even went as far as fantasizing about a zero deficit and revenues exceeding
expenditures.
The latter leaves one wondering, considering the President's assessment
of the situation and GDP decline. Using a comparatively neutral analysis
provided by Erste Bank Research (Austria) carried by the Central European
Economic Review in October, Ukraine's prospects are anything but optimistic.
GDP decline is forecast only in Russia and Ukraine among the Central and
Eastern European countries. In Ukraine, this decline is expected to reach
1.5% this year and 4.0% in 1999. This year's inflation rate is seen at
20-35%. Even though roughly a month is left to the end of the year, there
is every chance that Ukraine will justify this prognosis. The above source
promises that the budget deficit will be 3.5% of GDP next year which looks
much more realistic than the officially predicted 0.6%.
Incidentally, financial policy is traditionally a losing proposition
not only for the Cabinet but also for the Presidential Administration.
Traditionally, no one in government or the administration is personally
responsible for any failures in the financial domain. However, while the
Cabinet has the Finance Minister and Premier who somehow or another report
to the public, in the Presidential Administration financial policy is mostly
handled by people who failed to cut out a place for themselves in life,
in which sense that body seems to carry out the noble humanitarian mission
providing jobs to the needy.
Like everything else in our long-suffering Ukraine, the President's
message is clearly too little too late. Once again the official economists
did their utmost to make the Chief Executive's response sound very much
after the fact, irrelevant, and immaterial. As the crisis broke out it
was painstakingly camouflaged by independence anniversary festivities,
then for two months Mr. Kuchma showed almost no reaction to what was happening.
Now that the electorate is fully aware that the top political leadership
has turned its back on them and will never level with them, enter the President,
dwelling on the economy, proposing a number of so-called specific approaches,
including the adoption of a policy which will "actually stimulate production,"
easing the tax burden, strengthening the banking system (specifying banks
and laws), adjusting foreign exchange policy, developing light and food
industries, regularizing the use of centralized capital investments, supporting
business big and small, and halting the economy's flight into the shadows.
In the social sphere, the President's key argument was his proposal
to privatize Ukrtelekom, channeling the proceeds into paying off arrears
in wages and pensions. Mr. Kuchma apparently overestimates these proceeds,
and there is no data on its arrears on social payments.
To make his message logically complete, Mr. Kuchma asked not to "bother
the government daily," allowing it to work the remaining year. He also
mentioned that replacing the head of the National Bank was not expedient.
Finally, the President declared that the stated measures would be effective
and could be implemented before the end of 1999.
Even if viewed as the start of the election campaign, the message looks
very ineffective, considering the ruined economy and the chronically feverish
social sphere.
This message may well be regarded as fear and loathing. The President
fears the worst to come from all sides, especially that the economy will
come go bad to worse. And so does the Cabinet (the latter is still to report
to Verkhovna Rada). All of them are waiting for the New Year and the next
presidential campaign. In any case, such constant nervousness in our awful
economic state will suppress the slightest desire to do something to change
this situation for the better. Here the problem is not who is in government
or how well the branches of power can understand one another, not even
the President's constant threats addressed to Parliament. Under the circumstances
any government should be driven by the sole desire to postpone final economic
collapse before the President is reelected. Of course, Mr. Kuchma wants
this more than anything else and his message is graphic evidence of all
the complexes suffered by those in power. In fact, anything else could
hardly be expected.
Using criteria such as "good" and "mediocre," this message seems mediocre
rather than good. It is not likely to worsen the situation in Ukraine,
but it is sure not going to improve it.
By Oleksiy PLOTNYKOV, Ph.D. (Economics)






