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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

Loan issues

Ukrainian government is urged to produce a realistic budget
3 February, 2009 - 00:00

The current economic situation is becoming increasingly reminiscent of what happened in the mid-1990s, regardless of the shows put up by the powers that be on television, in which prefabricated questions receive prefabricated answers.

In fact, this approach is right — it is necessary to calm down the people and show that all the problems are known and are being solved. The only thing that does not go well with it are the frequently changed and unique expensive outfits, even greater portions of artistic skills and charm, and even more love for the people and hatred for their enemies and those of the government. At the same time, there are so few real decisions made that you badly want to switch this one-man show off. The current situation in Ukraine shows more and more obviously that the only real decision that the government is preparing is to tighten our belts. Compare this with tax cuts in other countries. In contrast to this in Ukraine they start with ordinary people, firing them or depriving them of wages and pensions. For example, in the National Academy of Sciences the salaries were nearly halved. Why not do this first with MPs, as was the case in a few other countries?

Meanwhile, the International Monetary Fund has every reason to demand early repayment of the first tranche ($4.5 billion) of the standby loan ($16.5 billion). Speaking to journalists on this issue, Oleksandr Shlapak, first deputy head of Presidential Secretariat, explained: “As it is today we are failing to comply with the IMF’s conditions.” In his words, the main problem for the Ukrainian government lies in the prospects of fulfilling the state budget 2009. In his opinion, the budget is not in line with the effective tax regulations. As a result, it includes 20 billion hryvnias that are not supported by any lawful tax sources.

Shlapak believes that the IMF exhibits great flexibility in its approaches and wants to hear from the Ukrainian government only one assurance: the budget is realistic. The liberals in the Fund make different concessions and are ready to consider the possibility of cooperation with Ukraine even if it has a three-percent budget deficit. “They are asking for one thing — show us a realistic budget,” said Shlapak in a critical attack on the government. However, he remained cheerful and optimistic when speaking about the possibility of losing the IMF’s money: “This is unpleasant but nothing too serious. A heavier blow will be dealt to the country’s image.”

Shlapak believes that if the budget stays within its current parameters, it can significantly drive up the inflation rate. In his opinion, in 2009 the driving force here will be the premier’s lack of professionalism. “If she gets her hands on the mint and uses it to its full capacity, I expect a very pessimistic scenario — the inflation rate of 100 percent and more.” But this is not the end of it. The budget crisis that Shlapak is forecasting will be a lot more severe than the currency crisis.

But these may be merely scary tales, which are being used against one of the main presidential candidates. It would be good if it were so. But his populist habits and oratorical talents in time of crisis can be a powerful weapon that is based on essentially hypnotic influence. It is very difficult for people not to lose the sense of reality and be able to distinguish between truth and insincerity in Shlapak’s words.

At a Monday meeting with agrarians promises were dished out: from cheap fertilizers to using VAT as a future tool to influence chemical producers — a secret that was divulged by a speaker who at one point got a little bit too talkative. They promised to bind them hand and foot and then moved on to the financial provision for agriculture, which needs 10 billion hryvnias for the sowing campaign only. A few simple moves, and the money is conjured up: 2.5 billion will come from grain sales; another 2 billion will be accumulated after the agrarian fund is allowed to export grain; the remaining 5–6 billion will be obtained with the help of refinancing of the banks, which, in their turn, will be obliged to prolong outstanding loans previously granted to agrarians and issue new loans. Until recently there was one chief banker in the country — the head of the NBU. Now the premier seems to be wanting to do this job part-time.

By Vitalii KNIAZHANSKY, The Day