Publication: Monitor Volume: 4 Issue: 225

Speaking on Saturday (December 5) in Dnipropetrovsk, Ukrainian President Leonid Kuchma said that the parliament’s failure to adopt the 1999 budget in a timely fashion would cancel prospects of cooperation with the IMF, the World Bank and the European Bank for Reconstruction and Development (EBRD). The president was also skeptical about adoption of a state budget with a zero deficit, which looks too optimistic in the current economic crisis (Inter TV, December 5). Last week, the parliament rejected the cabinet’s budget draft, describing it as unrealistic and sending it back to the government until December 9 for revision. At the same time, the parliament’s budget committee, which is unprecedented in Ukrainian budget making, submitted its own draft on December 2. While the cabinet proposed a budget draft with a rather optimistic deficit of 0.58 percent of GDP, which is lower than the IMF demands, the committee’s draft slashed the deficit even further, to the sensational zero level (Ukrainian agencies and television, December 2, 3).

Most observers believe that the committee’s proposals, while casting doubt on the professionalism of the cabinet draftees, are in fact even less realistic than the cabinet draft. This only worsens the situation. The process of budget adoption may now take more time than had been expected. There is a danger that the budget may be adopted as hastily as the one for the current year. That budget, signed on December 30, 1997, had to be amended by presidential decree some six months later.

Kuchma’s current worries are not baseless. The cooperation with international financial organizations was frozen in 1997, because the budget for that year was adopted not before January 1, 1997, when the fiscal year begins, but only in the summer of that year. Another cause for worry is the deliberately uncooperative mood of the lawmakers, who last week voted down a project on creating a fund of pre-export guarantees, sponsored by the World Bank. The parliament’s first deputy speaker, Adam Martynyuk of the communist faction, squarely told the visiting World Bank director for Ukraine and Belarus, Paul Siegelbaum, that negative attitudes towards foreign loans prevail among the lawmakers. Siegelbaum said that the economic situation in Ukraine is now better than in neighboring Russia and Belarus. However, he noted that the World Bank president, James Wolfensohn, doubts whether it is worth wasting money and time on projects which the Ukrainian parliament does not approve anyway (Ukrainian television and agencies, December 4). –OV