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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

PASSION FOR EXPERIMENTS SWEEPS PARLIAMENT But Verkhovna Rada has no wish to calculate how it will cost us

13 November, 2012 - 00:00

Over a month ago, at the closed to the press meeting of Verkhovna Rada, the IMF officer in Ukraine, Gohoon Kwon, presented to the deputies the IMF position on the financial situation in Ukraine and ways of managing the crisis. Apparently, his speech made an impression on the deputies since a month later, on July 19, seven economic edicts signed by the President went into effect.

Nothing, however, lasts forever. Last week, obviously in an effort to maintain the sense of alarm within Parliament, the President spoke to the representatives of parliamentary factions and heads of Verkhovna Rada committees. Since interaction with the President was closed to the press, we can only speculate on what events in the nearest future will be meant to bend the parliamentary majority toward supporting the President's course. Still, a certain opinion on the issues discussed can be formed from the nature of debates that unfolded in Parliament the following day.

Most likely, the deputies were not impressed by the government's concerns and of all those who has managed to make at least some sense of the state finances over the last several months of extensive media analysis of the issues. First, when Verkhovna Rada agreed to cut budget expenses without making official amendments to the law on the 1998 budget, it seemed that the President was able to find the right words to convince his opponents.

However, this time the Parliament leaders did not have to work miracles of compromise to interpret one of the law articles in such a way as if it allowed sequestering without its compliance. The shrewdest deputies view this decision as an omen of the government's upcoming resignation. This way the current government almost effortlessly won the notorious and long-fought-for hands-on management that gives no hope for longevity.

Then the Communists managed to include discussion of economic edicts in the agenda, obviously hoping that most of them would be abolished. All this is indicative of the President's failure to persuade his opponents either because of his unconvincing portrayal of the crisis or because of the leftist majority's readiness to play for survival. As the subsequent plenary meetings showed, such a turn of events was not accidental.

To begin with, the Budget Committee headed by Yuliya Tymoshenko decided not to include numerical parameters in the resolution, although they were part of the draft budget resolution proposed by the Cabinet of Ministers. According to Ms. Tymoshenko, the budget deficit indicator was taken out of the resolution "because different drafts estimated the deficit at 2 to 8% without any justification." However, the opinion range on the percentage of uncollected revenues did not seem to be the main thing. The key issue of the draft resolution was the requirement to provide only a "rating" of the budget deficit.

What is a rated deficit and how does it differ from a traditional one? The rated deficit is calculated by deducting the amount of budget revenues (taxes, credits, profits, etc.) from the amount of state expenditures stipulated by effective law. Tymoshenko is not quite correct in stating that the government has never calculated the amount of money it owes to people according to law. For several years, from 1992 to 1994, attempts were made to pay people as much as they were entitled to. The difference between budget revenues and necessary expenditures was then covered by printing new money, which resulted in galloping inflation and economic depression.

On the other hand, she is absolutely right in saying that the United States and Europe have allowed a 30% budget deficit in post-crisis years. But given that Ukraine has to this day retained a Soviet style system of state expenditures and a socialist economy, blind imitation of the figure looks very much like a simple desire to experiment.

The government is now trying to provide accurate estimates of how much the budget will get in revenues and how much it can take in credits to cover the deficit. Only after the deficit has been added to revenues can we start dividing the expenditures into priority categories. Hence, the deputies' demand to rate the deficit reflects their desire to postpone the main debates on priorities for later. It is quite obvious that until legislation turns the state budget into a real financial document, all attempts to draft it logically will drown in political rhetoric.

As expected, the IMF mission included in its list of conditions for an EFF credit a requirement for Verkhovna Rada to support the presidential program of crisis management. Unlike his Russian counterpart, the Ukrainian president is not vested with the right to introduce new legislation by his edicts, and thus he needs unconditional support in Parliament. International experts are confident that agreements with the IMF were violated due to weak presidential power, which means that it is dangerous to loan Ukraine money without Verkhovna Rada's consent. Under such circumstances, the only option for all of us is to be patient and to wait for the reaction of the Ukrainian authorities, or to borrow some optimism from the Communists and to prepare ourselves for survival.

 

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