UKRAINIAN TIGHTENS BUDGET BELT.

On July 9 the Ukrainian cabinet reprimanded Coal Minister Yury Rusantsov following an investigation of the allocation of budget funds in 1996 and early 1997. Serious errors were also found in the work of several other ministries, including that for social security. The cabinet needs to count every hryvna: since the start of the year wage arrears have risen 25 percent and now stand at 4.7 billion hryvna ($2.6 billion), and social tension is rising in eastern Ukraine. (Intelnews, UNIAN, July 9)

The 1997 budget, adopted by Ukraine’s parliament on July 4, envisages a deficit of 5.7 billion hryvna ($3.1 billion), or 5.7 percent of GDP. Budget revenues are projected at 22.4 billion hryvna and spending at 28.1 billion. The deficit will be covered by domestic bonds worth 3.3 billion hryvna and foreign bonds worth 2.4 billion.

The largest item in the budget (at 5.5 billion hryvna) is subsidies to industry and agriculture, which is stark testimony to the slow pace of reform in Ukraine. The second largest item is social security (2.2 billion), followed by law enforcement and national security (1.69 billion), defense (1.47 billion), education (1.5 billion), and health (650 million). The social security system (financed by a 6.5 percent payroll tax) is now technically an off-budget fund. This year no less than 2.5 billion will be spent on Chernobyl-related expenses — which helps explain why the Ukrainian government is still pressing for more foreign assistance in that area. Servicing Ukraine’s foreign debt will cost 2.5 billion, and the domestic debt 900 million. In 1997 GDP is expected to reach 100 billion hryvna: official data report that it fell 7.2 percent in the first five months of this year.

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