Ten Days that Shook Nobody
True to his pragmatic (and very correct) habit of using every opportunity to send “positive signals” to the market, new Premier Viktor Yushchenko told his fellow Ukrainians that he will not only work out a draft 2000 budget program, but also start real budget reform.
“The 2000 budget program means the start of budget reform in Ukraine. Give us just ten days to work on the project and you will see how different it is from the previous one,” Mr. Yushchenko told Parliament when discussing temporary financing budget disbursements at the end of last year. On November 18, Verkhovna Rada passed the 2000 budget bill in the first reading, envisaging a deficit-free budget with UAH 53 billion worth of consolidated budget incomes and UAH 40,750 million worth of state budget revenue. Since the bill was not made a law, Parliament adopted its “temporary financing” (continuing resolution) surrogate.
Experts maintain that Yushchenko’s budget is indeed a new document, different from all previous versions in terms of money, financial flows, and people given access to the national purse. How much does it answer the stated parameter of the start of budget reform? The question is not rhetorical, because this kind of reform has served as a stumbling block for more than one Cabinet and quite a few governments got stuck trying even to approach it.
Put simply, budget reform consists in mathematically equating two parts of state finance — what the citizenry is prepared to give the state from its incomes and what the state must spend to make payments under its commitments. Very simple, it seems. In reality, a true budget reform is not so much paperwork aimed at balancing incomes and expenses, but the result of the actual convergence of the aspirations and abilities of the state and society. Also, remember that Viktor Yushchenko is not the first to promise a balanced budget. Finance Minister Ihor Mitiukov has more than once reported implementation of a sequestered (i.e., balanced) budget. Yuliya Tymoshenko, chairperson of the Verkhovna Rada budget committee, has repeatedly offered her own secret recipes to the same effect. A year ago, she came up with an estimate of about UAH 100 million worth of outstanding state obligations which she proposed to refer to budget expenses (she thought that the corresponding incomes were a technical matter). This is also a balance, albeit not popular with civilized countries. Viktor Yushchenko champions balancing the state budget in a manner in which we will agree to give our beloved state a part of our incomes (at present, Ukraine’s number one publican Azarov says such voluntary payments do not exceed 16% of all tax returns), and that this money will be only enough for the state to finance its services to the beloved citizenry.
Unfortunately, to translate this banal formula into life in Ukraine, one must do much unpopular work. First, one must “organize” production and revenue growth (to secure tax payments). Second, one must reorganize the social sphere (e.g., health care, education, pensions, etc.) — social services at budget expense. Third, one must clean the stables of national resources being expended to maintain public property. Note that these are just the top priority components of budget reform. The list is practically endless.
Needless to say that the ten days Mr. Yushchenko asked for would never break Ukraine’s tradition of using the state budget on a public catering basis. He would not start a single serious budget reform, because it takes at least months, not days. But there is something the new Premier can do, something as important as budget reform.
At one time, Valentyn Symonenko, head of the Accounting Chamber, lashing out again at the Cabinet for its atrocious implementation of the budget, voiced an idea that quickly became a catch phrase: “There are no impossible budgets, there is a disinclination to implement them.” Outwardly this is a paradox. Indeed, everyone says that the kind and number of taxes we have in Ukraine cannot be paid; that social payments cannot be lowered any further. Everyone agrees that state capital investments are the last chance for our dying economy. This is true and untrue at the same time. Once they start breaking lances over the budget they forget that in terms of tax concessions Ukraine ranks first in the world. Exemptions currently equal budget gross income; that in terms of social payments and in conditions of toppling old output structures (and revenues) our impoverished state cannot compete with any of the developed countries in principle; that state capital investments without the government-appointed managers assuming financial responsibility for the results of their work are just another way to steal and steal in a very big way, and so forth.
Summing up, the start of the budget reform proclaimed by Viktor Yushchenko is thus far realistic only in the sense that his words and actual intentions are the same. The first real signs indicating the first results of this reform will appear months after Verkhovna Rada passes a number of bills (still to be passed because of their unpopularity with various interest groups in Parliament). Here the crux of the matter is increasing revenues in the competitive sectors (not to be mistaken for the oligarchs’ monopoly incomes) on the one hand; on the other, reducing the bloated financial obligations of the government, inherited from socialism, presently adjusted for use by the chosen few. It is further necessary to make the phantom state budget a reality. Here it is not so much legislation as generating the right kind of atmosphere for state finance. I think you know what I am driving at: corruption, of course. You can pass a hundred laws, yet you will not be able to forbid a government-level bureaucrat to buy a spare tire for his car from that bureaucrat’s company for $1,000. Just as there is nothing you can do to stop his trade in tax concessions, subsidies, and state contracts if these concessions, subsidies, and contracts are salable commodities.
Can Viktor Yushchenko cope with these tasks? We don’t know. He has not yet said anything one way or the other.
