ECONOMY FOR THE WEEK 

For example, last Tuesday President Leonid Kuchma announced he intended to sign a new package of economic decrees aimed at stabilizing the economic situation in this country, and a similar statement was also made on Wednesday by Prime Minister Valery Pustovoitenko. But does this mean the economic situation in Ukraine will get any better? Recall the President's hectic efforts last summer to form a "legal field" to sign the memorandum with the IMF, and promulgated thirty or so economic decrees. Since those decrees were written by different groups of political supporters, they clearly ran counter to each other. Moreover, they were not supported by Verkhovna Rada. This resulted in the long-awaited crisis that broke out in the fall, followed by stabilization. Now we can expect another a wave of decree-making.

Take an example from real life. According to an instruction dated May 24, the Cabinet of Ministers obliged the central and local authorities to pay as much as possible for social payments in the last week of May. Reassuring, is it not? But is it doable? If it is, then how can it be done if state budget revenues fell dramatically in May? Minister of Finance Ihor Mitiukov says, "The budget is in a very poor state. We have lost at least UAH 300 million because of the holidays. I think May will be one of the weakest months of this year, as far as new budget revenues are concerned... We will consider urgent measures to rectify the situation. The point is arrears keep growing, and only 62-63% of the taxes due are being paid."

Incidentally, similar instructions were issued on April 11 and 24, with an eye to speeding up social payments made by the Cabinet of Ministers. In April, social payment arrears from the budgets of all levels actually dropped by UAH 150 million or 4.2% and came to 3995.4 million at the beginning of May. In the first quarter, however, social payment arrears from the budgets at all levels increased by UAH 284.8 million or 8.7%. And one more "but." According to Interfax-Ukraine, the financing of the consolidated budget deficit rose from UAH 14 million on April 21 to UAH 582 million on May 11. National Bank (NBU) funding of the Ministry of Finance (i.e., emission) has already reached UAH 926 million this year. The NBU has thus exceeded the government funding limit by over 900 million, which was caused by meager foreign earnings and the absence of domestic demand for bonds. We can all see the effects of such monetary and fiscal policies on the market for consumer goods and services.

Sources at the price-formation departments of several oblast administrations told the Ukrayinski Novyny News Agency that the weekend before had seen an abrupt jump in the prices for foodstuffs, including sugar, flour, macaroni, and cereals. And although local authorities hastened to note the ensuing price drop, they most likely indulged in wishful thinking: nothing of the sort has been observed, at least not in the capital. It in fact cannot be seen because of the continuing production slump and the upward tendency in flooding the market with unsecured money.

"It is mainly sugar, flour, and cereals that have gone sharply up in price," said an expert of the price-formation department in the Mykolayiv oblast administration. The price of sugar has risen, on the average, from 1.5 to 2.5 hryvnias/kg, that of flour from 0.6 to 0.8-1.1 hryvnias/kg, that of buckwheat cereals from 1.7 to 3 hryvnias/kg. Local experts put the increased foodstuff prices down to a panic buying caused by the negative expectations in connection with the May frost spells being interpreted as foreshadowing a poor harvest. "People artificially created demand to which the market reacted instantly," said an expert from one oblast. "The people has begun to fear expected negative results of the late frost and to actively buy up foodstuffs, to which the wholesalers reacted immediately," said the representative of another oblast.

By all accounts, it is not at all important what triggered the price rise. The important thing is that the populace has ready cash to buy up the goods at higher prices. Meanwhile, a number of regional bosses seriously contemplate the introduction of fixed prices for foodstuffs. For example, the Kharkiv oblast administration, according to a source at its price-formation department, will regulate foodstuff prices. "In the next few days the legal organs will an instruction on price regulation in Kharkiv oblast," the source told Ukrayinski Novyny on May 24.

It should be noted the syndrome of administrative intervention in bazaar relationships will end up as sadly as administrative regulation did in Soviet times. Our local leaders must have forgotten what could come of this. Or perhaps on the contrary, they wanted to learn a lesson? Fortunately, they do not have to rummage through old newspapers. Suffice it to glance at the latest news from Belarus, where that country's strongman has launched a new offensive on price hikes. President Alyaksandr Lukashenka gave a full vent to his anger at a government meeting on May 18. "We have a manageable state, we have strong power, we are capable of carrying out any measure related to price-making," he said. Then two days later on May 20 he issued a decree on tighter price controls. Under the decree, the government is to set limits on price variation within a month. If an enterprise intends to raise prices higher than the set limit, it will have to register these prices with administrative bodies on the basis of a feasibility report. Raising prices above the limit index without proper registration entails transfer of the obtained income to the budget and levying a fine twice that of the income derived. Why have prices become by far the central problem of the Belarusian economy? Inflation was 283% last year. This year, inflation was planned at 5-6% a month but in fact was 15% a month, and only in April did it drop to 8%. Consumer prices rose by 48% in the first quarter, and prices of industrial goods went up by over 78%. Most noteworthy is that until recently prices were regulated on the consumer market. But now the situation has changed: since the beginning of this year, prices in the industrial sector have been outdoing those in other sectors. And nobody can curb this process.

Why? Because the authorities artificially hold back the exchange rate to "save" consumers from fuel price hikes. Since the rate is extremely overrated - the market rate is twice the official one - this causes deformations in the economy. Shortages and endless lines for eggs, butter, and other goods became a kind of calling card for the Belarusian economy late last and early this year. Now there are no lines. Price rises have beaten shortages.

However, Ukraine will not necessarily face such global results of price control. As soon as the IMF and other lending organizations furnish loans to the government, the events of six months ago will repeat themselves: after a speedy emission, the NBU will simply reduce the amount of money in circulation. And where there is no empty money, there are no price rises.

By Iryna KLYMENKO, The Day