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Where there is no law, but every man does what is right in his own eyes, there is the least of real liberty
Henry M. Robert

Cabinet Wants to Cut State Budget

2 March, 1999 - 00:00

Deficit reductions planned will not save Ukraine from bankruptcy

By Vyacheslav YAKUBENKO, Vitaly KNIAZHANSKY, The Day
The Ukrainian Finance Ministry has announced the government's intent to
reduce the budget deficit by Hr 600 million this year by sequestering funds.
Foreign loans and governmental bonds are the main instruments for reducing
Ukraine's budget deficit.

According to the Ministry, foreign borrowing has not been successful
due to the global financial crisis (while the government tried not to notice
that even under the crisis the international financial entities continue
to massively credit Latin America). And financing expenses through government
bonds has been called problematic.

Thus, after the first month of budget performance, the government did
nothing but predict an almost Hr 2 billion "shortage." Interfax-Ukraine
reports that budget financing as of February 15 had a negative value of
Hr 302 million. The situation seems to be deteriorating before our eyes,
for only a week ago Deputy Premier Serhiy Tyhypko related the possibility
of a sequester in the second quarter.

Meanwhile, experts of the Ukraine-Europe Legal Consulting Center estimate
the lack in budget funds caused by Ukraine's obligation to pay about $2
billion in foreign debt (while a maximum of $1.6 billion is expected from
foreign creditors) at $560 million. This is three times more than the planned
sequester. According to the UELCC experts, if the requisite funds are not
paid, the consequences of bankruptcy and default will be destructive to
the nation's economy and lead to even worse impoverishment of its population.

In these experts' opinion, budget cuts should be considered primarily
for the irrational structure of the executive branch.

Vitaly Melnychuk, Deputy Chairman of the Parliamentary Accounting Chamber,
told The Day that the government should be concerned not only with
reduction of expenditures, to which it will finally be forced, but also
with enhancing revenues. However, the government considers the latter option
obsolete, he said.

Before the upcoming presidential elections, a sequester is most likely
to cause many problems for the executive, both with the people and Parliament.
Budget cuts will entail strikes, meetings, and picketing by workers in
the sectors affected. Consequently, it is not surprising that as recently
as Monday before last Deputy Speaker Adam Martyniuk could not even imagine
someone's announcing a sequester before the elections, "even if the budget
goes to ruin". In addition, Verkhovna Rada is constitutionally bound to
adopt any changes to the law On the State Budget. Deputy Chairman of the
Budget Committee Yevhen Zhovtiak informed The Day that it is premature
to discuss this issue now, because the government "has not utilized all
of its capabilities to collect revenues; in particular, there have been
still no instructions concerning the distribution of Hr 5.2 billion obtained
through mutual offsets for energy supplies.

Actually, Parliament can be dispensed with. The law On the Budget System,
which conforms to the Constitution, allows the President to unilaterally
sequester funds. But then three questions arise: what will the Constitutional
Court say; what can such a President expect in the elections and the simplest
one: why did Verkhovna Rada adopt the budget at all?

 

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