Better This than No Budget at All

Parliament’s quick approval of the budget bill in the first reading seemed to have taken even the MPs giving their ayes by surprise. A situational majority, appearing out of nowhere, sufficed to spare Ukraine another budget saga. The approved budget income and expense items will be changed more than once, of course, there is no sense analyzing them now. Yet the very budgetary process this year allows one to arrive at certain “nonnumeric” conclusions likely to remain valid till its completion.

MAJORITY ON INTEREST CROSSROADS

The political confrontation between Our Ukraine and 9 pro-presidential factions suddenly vanished when it came time to vote for/against the budget bill. OU controls the Verkhovna Rada budget committee and is not interested in blocking the process. The Nine, in principle, are against any political confrontations. This alignment may become that golden means in finally adopting the budget program, so the bill can be passed before the end of the year. Some political analysts are making far-reaching forecasts concerning a new majority involving Our Ukraine. It is a definite possibility, provide bills are put to the vote, representing OU or OU-controlled committees.

TOUCHING RAPPROCHEMENT

The finance ministry practically sought no cooperation with the VR budget committee when drafting the 2003 budget bill. The committee responded by working out their own “exclusive” bill, with both sides constantly talking about steering a middle course. The bill voted for in parliament was the one submitted by the VR budget committee. Finance Minister Ihor Yushko, commenting on the first reading, referred to some clauses as “unreasonable.” Similar epithets were used by budget committee chairman Petro Poroshenko after studying the cabinet’s bill. Paradoxically, Messrs. Yushko and Poroshenko behave like chum buddies in public. This touching rapprochement between the key figures of the budgetary process is likely to remain.

HELPFUL CHAOS

The budget bill was passed in the first reading in manner best described as off the cuff. The MPs received the text with the VR budget committee’s findings ten minutes before the bill was put to the vote. The findings occupied 100 pages, single spaced and in a small font. Some of the people’s deputies tried to figure them out there and then. Others walked out as a sign of desperate protest. Most, however, stayed put, awaiting a miracle of sorts. Before it occurred and the bill was passed, another collision took place. When it came time to vote, the MPs discovered they did not know whose bill they were to vote for, VR’s or cabinet’s. Some, of course, had been discretely explained, others had guessed, but most simply gave their ayes lest they block the process. Whether that chaos was a planned action or the secretariat was actually late dispensing the copies is anyone’s guess. The main thing is that everybody achieved a result.

LOBBY: BIDING THEIR TIME

For the first time this year the sectoral parts of the lobby showed no traditional aggressiveness fighting over budged appropriations and tax concessions. The coal industry is suffering an excruciating defeat, expecting UAH 5 billion worth of subsidies for the mines, receiving just UAH 2.2 billion. Oil businesses, extensively represented in all factions, wanted to lower the rent annually paid by their companies to the budget from 5% to 2% of the cost of everything extracted from Ukrainian soil. They did not have it their way, either. The steel industry seems to have finally discarded its plans to receive preferred conditions to develop the sectoral tax experiment — ditto the government VAT compensations. It is, however, possible that the lobby are just biding their time, bracing for a decisive battle during the second reading of the budget bill, expected in a month’s time. The coal people are ready to go on strike, the oil and gas ones will demand higher prices, the steel ones are likely to threaten the cabinet with foreign exchange nonpayments. All are waiting for the H-hour.

One positive aspect about this budget bill that it does not smack of populism. A lot of items (e.g., privatization proceeds estimated at UAH 4.3 billion) are overstated, as usual, but on the whole the debate showed that the MPs did not want to have the prices of sausage lower during the year, at all costs, and turn on the money-printing machines to help the gypped depositors. Healthy pragmatism is the direct consequence of the absence of early elections. MP Kateryna Fomenko, chairperson of the local budget subcommittee, informed that they had found additional finance sources to provide the regions with UAH 1.05 billion worth of subsidies to the regions, which money would be spent on a target-oriented basis, to increase wages and salaries in education, medicine, and social service. However, the final decision will be made by the cabinet. So much in terms of good news for a Ukrainian in the street.

REASON WILL EVENTUALLY GET THE UPPER HAND

Ukraine will have to spend a trying year, in view of the threat of economic growth decline, record payments on account of the public debt, and changes in tax rates. The fact that the MPs and cabinet people show as yet no symptoms of the election campaign fever allows one to hope that a reasonable approach to the problems will be eventually adopted. Anyway, there is always the possibility of a situational majority...