In Search of Lost Savings. Who Will Promise More?
The Cabinet of Ministers has requested President Leonid Kuchma veto the law On State-Guaranteed Compensation for Deposits Lost by Ukrainian Citizens. It will be recalled that this law envisages full repayment of lost USSR Saving Bank and Insurance Fund deposits at the rate of 1 ruble/1.05 hryvnias within 14 years. Prime Minister Anatoly Kinakh said the government has no money to fulfill this resolution of parliament, for this would mean paying an annual UAH 9.6 billion and, from 2007 on, an annual UAH 18 billion to the population.
Conversely, the budget adopted by the same parliament a month ago allocates a mere 500 million hryvnias this year for deposit compensation. According to the premier, there are no financial sources whatsoever to effect a twenty-fold increase of this expenditure item. “To fulfill this law, we would have to resort to emission methods,” Mr. Kinakh says. In other words, Verkhovna Rada suggests that the Cabinet switch on the printing machine and spit out money enough to appease the public, at least before the elections. What a money emission can eventually lead to still lingers in the mind of Ukrainians who felt the inflation shock of the early nineties.
Although the subject of deposit compensation invariably becomes popular among politicians on the eve of an election, they still fail, for some reason, to map out and coordinate with the government a program to solve this problem. By all accounts, somebody stands to gain from an uncertain situation with the lost deposits. No politician openly rejects the idea of paying the people “everything, as soon as possible, and by all means.” Parliamentary Vice Speaker Stepan Havrysh said the deputies had approved one of the most successful and realistic options of deposit compensations. “Repayment of deposits within 14 years is unlikely to be a heavy burden on the state budget,” Mr. Havrysh promises. Mr. Kinakh also notes good prospects for the state to clear its arrears to the population on a long-term basis. But while he as prime minister is, naturally, more concerned about the current budgetary situation, the deputies forgot, for some reason, to timely introduce UAH 9.6 billion into the 2002 budget. And only now, after spending the Christmas recess in their constituencies where they heard their fair share of hard luck stories from their voters, have they suddenly decided to oblige the government to urgently find another 9 billion hryvnias.
What has kept Ukraine from monetary emission in the past few years is the fact that presidential and parliamentary elections are held at different times. Considering the government proposal to veto the deposit compensation law, President Leonid Kuchma is unlikely to be guided by election considerations only. Unlike most deputies, he would clearly prefer, in the current situation, to have an economically-stable country rather than satisfy the fleeting caprices of the voters. Thus their is a fair chance for the veto. In all probability, Mr. Kuchma will suggest that parliament modify the bill, clearly indicating the sources of funding. This means mass public payments will begin not before next year unless, of course, Verkhovna Rada suddenly decides, in the heat of the campaign, to urgently double all taxes.
And, to mitigate the impact of the government stand on the tender hearts of sensitive citizens, the Cabinet has put forward its own plans to raise public-sector pay and pensions. Tellingly, these plans are confined to only three months, i.e., the pre-election period. Those employed in cultural and educational institutions will have their fixed rates of salary raised by 10% as of February 1. The army and police are also in for financial improvements before the end of the quarter. The premier recalled that pensions had been increased from January 1 and promised in addition that all social guarantees and privileges would be effective until the elections in the same amount as last year. This means the Cabinet will fulfill the law passed the week before last envisaging the resumption of cut-rate transport, health treatment, and reduced telephone charges. This law is also being scrutinized by the president, following the government’s veto request.
