Cabinet presents year 2000 budget to Verkhovna Rada (10/17/99)

Cabinet presents year 2000 budget to Verkhovna Rada

by Roman Woronowycz
Kyiv Press Bureau

KYIV - The head of the Budget Committee of Ukraine's Parliament said on October 7 that the budget for the year 2000 proposed by the Cabinet of Ministers - and a forecast that the gross domestic product would rise by 2 percent - is unrealistic.

The budget, which was delivered to the Verkhovna Rada on September 15 as required by law, was officially presented to the parliamentary body by Finance Minister Ihor Mitiukov. The law mandates that the Parliament begin discussing it by October 15 and approve a budget before the end of the year.

In his address to the national deputies Mr. Mitiukov underscored that no cuts were made to the outlay side of the 2000 budget in social safety net programs, Chornobyl-related programs and support for the coal mining industry, and that the government had found additional funds for education, health protection, social protection and sports.

However, Mr. Mitiukov was quick to emphasize that the key to the budget was an increase in revenues, which he pegged at $38.6 million (U.S.) for 2000. If that goal is achieved - and Ukrainian authorities have had little success collecting the taxes and tariffs that make up a large portion of government revenues - then the budget would have a $554 million (U.S.) surplus in 2000, the first surplus since independence.

The budget Mr. Mitiukov presented also calls for the first ever growth in Ukraine's GDP, which is predicted to reach 2 percent in 2000.

National Deputy Yulia Tymoshenko, who chairs the Parliament's Budget Committee, called the figure inflated and said it should be closer to 1 percent. She criticized the budget as a whole, saying it needs to be greatly reworked by the national deputies.

"The budget is unrealistic and cannot be realistic in principle. The government chooses on its own what to finance and what not to finance," said Ms. Tymoshenko, who was once a leader of Pavlo Lazarenko's Hromada Party and is a vocal critic of the Kuchma administration. The Budget Committee chair accused the government of using unrealistic macroeconomic indicators to make the numbers work.

The budget Mr. Mitiukov presented forecasts a 2000 GDP of 150.8 billion hrv with 17.6 percent inflation and a currency exchange rate of 5 hrv to $1 (U.S.). This year inflation is running at an annual rate of approximately 16 percent and the hryvnia to dollar exchange rate is currently about 4.5 hrv to the $1.

Ms. Tymoshenko cited the shifting of funds from non-budgetary sources, such as the Cabinet of Ministers emergency fund, to cover costs of budget programs, as another example of the unrealistic way the budget was calculated. She also noted that it is not reasonable to predict that revenues will increase in 2000 when they have been falling for the last several years. As Ms. Tymoshenko explained, the revenue side for 1998 was $3.3 billion (U.S.) less than in 1997 and last year it was $3.1 billion less than in 1998. She said her committee has figured that in 2000 government revenues will be $1.1 billion less than this year.

Ms. Tymoshenko also said that the Budget Committee's calculations suggest that 100 billion hrv will be needed to cover outlays in 2000, and not the 38 billion hrv the government predicts.

One of the most difficult tasks that Ukraine will face in 2000 is finding the money to repay 16.4 billion hrv in internal and foreign debt servicing. Mr. Mitiukov said that $1.4 billion (U.S.) of the nearly $3.1 billion that will be owed to foreign banks will be drawn from international financial organizations such as the International Monetary Fund.

The finance minister admitted that three separate issues could break the 2000 budget: failure to find the finances to service the national debt; failure to collect predicted revenues; and the risk that the Parliament could reshuffle the budget and re-prioritize the outlay side.

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