What is it all about?

Premier Valery Pustovoitenko stated that enacting a budget with a surplus would be a bad idea because it would make it impossible to solve a number of social issues. On the other hand, a budget deficit would also not be in the Cabinet's interest, as it would no longer be in a position to get loans.

The Cabinet's draft budget program for 2000 stipulates revenues worth UAH 2.1 billion and UAH 26.5 billion expenses, with a surplus totaling UAH 554.6 million. The document was composed allowing for the prognosticated UAH 150.8 billion worth of GDP, at 17.6% inflation and a 5:1 average annual hryvnia exchange rate to the dollar. The “proficit,” as they call it here, it was the Finance Ministry's main requirement. Why? The reason is simple: according to Finance Minister Ihor Mitiukov , Ukraine has been paying for loans with new loans in recent years (borrowing from Peter to pay Paul —Ed .), thus spreading payments over longer periods. Next year, however, it will have to pay 2.1 times more in terms of liabilities than this year. Mr. Mitiukov believes that only $1.4 million can be scraped up to pay of the public debt.

And so the Finance Ministry insists on a budget surplus precisely to bridge this gap.

Yuliya Tymoshenko, chairperson of the parliamentary budget committee, made her opinion on public debt payments clear: “In this part of the budget we are bankrupt, of course, and the surplus won't save us. We will work to help the state avoid default.”

Then suddenly the Premier (i.e., the man heading the government insisting on the surplus) says, “I think that we will achieve a zero deficit, and I will continue to work that way.” In other words, Mr. Pustovoitenko actually seconds Ms. Tymoshenko's idea (two days earlier she stated, “We will ask Verkhovna Rada to support the People's Deputies' zero deficit draft budget program.”).

Ms. Tymoshenko stressed that forming a budget showing a surplus was the main but by no means only objection of the committee, adding that the Cabinet's draft budget for 2000 does not allow for 90% of Verkhovna Rada's requirements; it provides for higher taxes and does not adhere to the bottom-to-top principle of drawing up local budgets; the state does not receive one cent's worth of revenues from public property handed over for management; there are still no non-tax returns (e.g., transit fees) to the state budget, and so on.

In addition, Parliament insists on canceling the Innovation Fund which, in the budget committee's opinion, only serves to increase a tax burden, which the country can no longer bear.

When asked by The Day about the government's off-budget funds turning the budget into fiction (even in the unlikely event of its being strictly implemented), Ms. Tymoshenko replied that the Cabinet's stand remains unchanged, although last year she broached the subject, pointing out that over UAH 2.5 billion had passed through the government's more than 600 off-budget trust funds.

All criticism aside, she declared that the budget committee will not move to return the draft budget for revision. “Experience shows that this is utterly useless. We will use it and try to revise it ourselves.”

Apparently, this — about not sending the draft budget for revision — allowed the Premier to note (according to Interfax Ukraine) that, by and large, he feels satisfied with the Finance Ministry's efforts in drafting the 2000 budget program, as well as with the budget committee, which has decided to analyze the document in early November, after the presidential elections.

Meanwhile, the committee's last session left one with the impression that all Parliament's attempts to get the budget implemented and transparent are fruitless.

Accounting Chamber Chairman Valentyn Symonenko summed up his analysis of the 1998 budget: “The budget law is not implemented.” One can accept or argue about some figures or others provided in Symonenko's report (argue was the watchword with the Cabinet's representatives), but the principal inference remains: the government is spending budget money as it sees fit and not at all in accordance with the budget law. In fact, no one in the audience tried to challenge it, just as nobody argued another point: no one has been made responsible for budget law transgressions, neither the Cabinet nor the Treasury.

Against this background, arguing about figures was simply boring (although there are irrefutable statistics, such as dropping GDP, mounting unemployment and pay arrears, and the expanding government machine).

One cannot but wonder: if everybody knew in advance that the budget would not be implemented, why bother voting for or against it? Why all the Parliament-Cabinet jousting? Why calculate and recalculate everything over and over?

The Dayasked People's Deputy Oleksandr Lavrynovych, who said, “The annual ‘budget passions' are a ritual on the one hand; on the other hand, the interests of certain structures are actually involved; by using certain budget items they push through the kind of financing they need and do so on apparently legal grounds, regardless of the greater financing priorities that are also to be implemented using the budget.”

The Day: Do IMF and other international financial institution officials realize that their monitoring is actually a work of fiction called the Ukrainian budget?

O.L.: Strictly off the record, they say something like “We realize that international financial aid is not used in Ukraine for economic or administrative reform, or for creating any prerequisites to increase GDP.”

In fact, when deciding on the next installment the emphasis is on politics rather than economy.” Of course, the rich West can afford to prefer the political aspect of loans. Ukraine cannot, because its current economic situation threatens its very existence as an independent state. In turn, we see that all those “political credits” which, in Mr. Lavrynovych's own words are “drunk up, spent on maintaining the government machine or simply stolen” produce the reverse effect. No economic reform, falling GDP, rising back pay and pensions all serve to enhance the Communist position. This is more proof that the West is far from always fully aware of who it can deal with in Ukraine.

By taking a simple oath, “I solemnly pledge to oppose the Communist revanche and spare no IMF money in the struggle against Communism,” one can secure oneself a rather decent living and perhaps for a long enough time. However, the outcome is always the same: economic and political bankruptcy.

The Verkhovna Rada budget committee decided to schedule the 1998 budget progress report placed on the parliamentary agenda on October 3 (the day prior to hearing the 2000 budget program) and forward the Accounting Chamber's findings to the prosecutor's office.

Regardless of the outcome of the parliamentary hearings on the 2000 budget, one thing is now clear: the current regime is to blame for all our troubles, with the President being its key element.

“Today's Constitution and all the other laws vest most authority in the Chief Executive,” Oleksandr Lavrynovych believes, “and retaining this authority any further will inhibit making the draft budget a realistic law as well as monitoring the effective use of loans.”

As it is, Ukraine emerges as a unique polity, in that its state budget is not as binding as an actual law, and that the budget is signed by the President. The fact remains that parliamentary systems emerged on the world political arena precisely in conjunction with budget enacting procedures such that no one can meddle in the budget process after Parliament. In other words, no one will be responsible for the implementation of the budget unless changes are made in the Constitution in the direction of either a parliamentary or presidential republic, although many lances will still be broken over every budget item.

COMMENT

Imaginary Affluence from Sly Statistics

The Cabinet's draft consolidated budget for 2000 envisages expenses outstripping those of 1999 in absolute terms, namely by 5% in the sphere of education, 9% in health care, 16% in social protection, and 7.6% in physical education. How nice., the more so that budget revenues are stated to surpass expenses by UAH 0.6 billion.

In reality, however, this is just more juggling with the facts. The thing is that the 2000 budget expense items were drafted allowing for 20% inflation in early 2000, while no such allowance was made when computing social disbursements, meaning that, to make the relevant 2000 indices equivalent, they have to be divided by 1.2.

Thus actual 2000 social expense items, compared to 1999, are as follows: 88.1% (1.057/1.2) in education; 90.8% in health care; 96.8% in social protection, and 89.7% in physical education. Hence the arithmetic reveals the smoke and mirrors, Yevhen BOLSHAK