Where will they take money for promises?
Experts say activating NBU printing machines and receiving Russia’s loan are very risky but perhaps the only practicable options
The belt-tightening period is over, with the Ukrainian administration having laid the foundations for a higher living standard, said Prime Minister Mykola Azarov during the Party of Regions’ convention last Saturday, referring to President Yanukovych’s new social program.
Experts aren’t as optimistic. On the one hand, the president’s social initiatives could cause another inflation upsurge; on the other hand, they would require very big sums, considering today’s domestic economic situation. Deputy Prime Minister Serhii Tihipko says this new social policy will cost the central budget at least 25 billion hryvnias. The Ministry of Economy’s estimates point to the possibility of receiving 7-7.5 billion hryvnias from the State Customs Service, along with 2.5 billion hryvnias from the State Tax Administration. Deputy Economy Minister Vadym Kopylov promises 6.5 billion hryvnias as privatization proceeds. Tihipko feels sure the central budget will receive large sums in terms of wealth and offshore tax returns. Anatolii Kinakh (Party of Regions) insists that government procurements are the most practicable source of central budget revenues. The newly appointed Finance Minister, Yurii Kolobov (who will shoulder the burden of seeking such additional funds), has remained silent. The Day’s experts refer to his bureaucratic background, saying he is very likely to activate the National Bank’s printing machines.
COMMENTARIES
Viktor BORSHCHEVSKY,Ph.D. (Economics), Lviv:
“The finance sources of these highfalutin top-level social and economic growth initiatives will most likely remain the same. First, there will be the same kind of redistribution of central budget money along two lines: (a) some will lose budget appropriations (science and culture), while others (pensioners and socially unprotected strata) will receive more; (b) there will be varying budget payments, on the lowest acceptable level in the first half of the year, followed by a dramatric increase shortly before the election date. Second, the government may well launch a monetary emission on the parliamentary election’s eve, when faced with problems concerning adequate budget resources and the implementation of social obligations. This move appears to be even more likely, considering the subjective factor that has a lot to do with the current finance minister’s professional background. Also, the president won’t need his Cabinet’s help if and when he orders to start the NBU printing machines. Ukraine’s loans received from abroad are the third potential central budget’s replenishment source. Even if the IMF and other financial institutions in the West disagree with the current Ukrainian administration on this issue, there will be Russia and its satellites. They will be willing to help in return for Ukraine joining the CIS Customs Union, selling its gas transportation system, making other political concessions, you name it.”
Roman KUCHERENKO, chairman, cycle commission on economic subjects, Kaniv Ecology Information Technological College:
“This is further proof that plagiarism is possible not only in the scientisfic, technological or literary domains. We have enough evidence to say that there is plagiarism in the political realm in Ukraine, that a number of domestic politicians, Cabinet members and their consultants lack creative talent. Yulia Tymoshenko once launched her project ‘Ukrainian Breakthrough,’ which markedly resembles that of Anatolii Kinakh. Our president’s latest initiative, fed to the general public as the first of its kind, is strongly reminiscent of a political candy wrapping. Prior to the next election campaign, the incumbent head of state, Viktor Yushchenko, launched ‘The Social Initiatives of the President of Ukraine’ during his visit to Ostroh. President Yanukovych’s document has a similar heading. Interestingly, President Yushchenko ordered Prime Minister Yanukovych to carry out his social initiatives. Yanukovych, of course, shifted the heavy burden toward his first deputy Mykola Azarov. Yanukovych’s latest initiative is a campaign stunt, as evidenced by borrowings from the Tymoshenko Cabinet’s social initiatives (concerning 1,000 hryvnias due every Soviet Savings Bank depositor), which money was to be added to the presidential campaign fund.
“In regard to the economic aspects of these socially ‘innovative’ projects, the important thing is for at least a part of Ukrainian society to realize that a sudden, economically unsubstantiated, living standard’s increase will be short-lived. Switzerland serves as a very good example of a solid civil society where every communal member casts the ballot using his/her brains. I mean the Swiss referendum a week ago that rejected the annual paid six-week vacation for everyone because the respondents found it economically unsubstantiated.”
Mykola HORDICHENKO,Associate Professor, social-humanities chair, Glinka Conservatory of Music, Dnipropetrovsk:
“I believe that the promises made by the president are absolutely practicable. Our tax laws are anything but adequate; they don’t provide for our vast social diversity, with well-to-do citizens paying the same taxes as those on or below the poverty level. The institution of the wealth tax is long overdue. Ukraine, being a poverty-stricken country, buys and sells a record number of cars and limos, each costing a small fortune – a fact that leaves foreigners wondering. Ukrainian nationals make costly purchases and pay for luxury resort accommodations abroad. There are plush cottages in every Ukrainian city suburbs. Ukraine must have the progressive and estate taxes, as practiced in every developed country. In the United States, the estate tax provides some 90 percent of the federal budget revenues, albeit with the legal loophole of benevolent foundations. Wealthy Americans can transfer their money to such foundations’ bank accounts instead of footing the heavy IRS bills, yet such foundations must pay for research and/or social projects.
“Also, it is necessary to deal with not only business people who have millions, if not billions, on their bank accounts, but also with [ranking] bureaucrats. These bureaucrats must be forbidden to use costly foreign car models, even as company vehicles; they must be forced to use domestic models, small cars or minibuses. The mayor of New York City gets to his office by a commuter train; his Copenhagen counterpart, by riding his bicycle. Upper-echelon Ukrainian bureaucrats use their company vehicles whichever way they choose and there is no one to control them.
“In a word, Ukraine has enough hard cash, but it lacks the political will to expose this money to effective and socially justified taxation procedures.”
Interviewed by Tetiana KOZYRIEVA, The Day, Lviv; Viktoria KOBYLIATSKA, Cherkasy; Vadym RYZHKOV, The Day, Dnipropetrovsk
