National Bank director underscores financial stabilization (07/28/96)

National Bank director underscores financial stabilization

by Yaro Bihun

WASHINGTON - Viktor Yushchenko, the director of the National Bank of Ukraine, says his government has a plan that in the next few weeks will alleviate the acute problem of non-payment of wages.

Discussing Ukrainian economic issues at a roundtable at the Center for Strategic and International Studies here on July 12, Mr. Yushchenko said President Leonid Kuchma's government has intensively worked on this problem over the past 30 to 40 days.

He said the plan, which will not require the printing of more money, includes, among other things, the mobilization of the tax revenue system, forcing regional leaders to fulfill their responsibilities in providing budget revenues, and fiscal measures.

This initiative has already shown positive results, Mr. Yushchenko said, pointing out that on the previous day the national budget received revenues of 4.6 trillion karbovantsi, three times the normal inflow.

The problem will not be solved easily, he said, but added that "we are convinced that if we mobilize all of our internal resources and develop a strategy - and in some cases with the help of international financial organizations - we can resolve the non-payment problem at least in the acute form we find it in today."

Asked if the stabilization of the Ukrainian currency was not achieved at the expense of wage payments, Mr. Yushchenko said the National Bank is not responsible for the problem, which, he said, is not a monetary but a budgetary problem.

Mr. Yushchenko stressed that financial stabilization "is one of the most shining successes of Ukraine's economic reform program."

Over the past year, the karbovanets has been stable and has even strengthened over the last six months, he said, and pointed to other figures that demonstrate an improved monetary situation:

In May of 1995, Ukraine's foreign earnings were $370 million, while 40 to 60 percent of foreign trade was conducted using the barter system. Today, monthly foreign earnings are $1.74 billion, and barter is down to 20-21 percent.
The "dollarization" of the Ukrainian economy has dropped from 40 percent in January 1995 to 18.5 percent today, which demonstrates an increased level of confidence in the Ukrainian currency, he said.
Inflation is down: in the first six months of this year, inflation was 22 percent; it was 0.7 percent in May, and 0.1 percent in June.

"We can speak about 1996 as a year of an impressive victory in the economic reform program," Mr. Yushchenko said. "We can now state that the Ukrainian currency is a hard currency, which one can and should use."

He said that on the occasion of Ukraine's fifth anniversary, the government will issue a 150-gram silver hryvnia coin, a replica of the six-sided Volodymyr coin used in the 11th century.

Also participating in the CSIS roundtable was Roman Shpek, Ukraine's deputy prime minister named recently to head the newly created Ukrainian Agency for Reconstruction and Development.

Mr. Shpek said Ukraine sees its economic success as being tied to the development of its private sector. "I think this will lay the solid foundation for the development of democracy and an effective economy in Ukraine," he noted.

In cooperation with various international financial organizations - the International Monetary Fund, the World Bank, the European Union and the G-7 - Ukraine has begun restructuring its energy, coal and agricultural sectors, Mr. Shpek said.

"All this is fine, but it is not enough," he added. "Ukraine will be able to accelerate its reforms only when private capital - both Ukrainian and foreign-will flow freely. This is one of the main catalysts of future economic reforms," he said.

The most important positive indicator of the present Ukrainian leadership is that "they talk of the need for reform, the need for making unpopular decisions."

"They are preparing the people to accept the fact that everyone must do his own work and take the responsibility for it." The main responsibility of the government, he said, is to remove all of the bureaucratic roadblocks that impede entrepreneurial development.

"It is very important to instill in the people the notion that they are responsible for their own well-being, for the well-being of their families," Mr. Shpek stressed. "The government cannot provide this for them, it can only create the necessary conditions. For 75 years, the government 'gave' its way into poverty," he added.

Mr. Shpek and Mr. Yushchenko were visiting Washington for talks with representatives of the IMF and World Bank, and with U.S. officials.

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