And you thought the IRS was tough! In Kyiv, Prime Minister Valery Pustovoytenko told a gathering of 2,200 regional officials and enterprise directors that they would be sequestered in the hall until they paid their delinquent taxes. Police and security forces blocked the exits while the prime minister told his captive audience that the toilets were in working order. He added that access to telephones and fax machines would be permitted, so that subordinates on the outside could be instructed to prepare the paperwork and forward the money. The government lifted the siege of its own officials the next day.
This bizarre event illustrates the desperation of a government sliding from insolvency toward financial collapse, getting a shove along the way from a hostile parliament. The government’s hope is a quick cash infusion from the International Monetary Fund, which would trigger release of funds already committed but not disbursed by the World Bank and the European Bank for Reconstruction and Development. The IMF reached agreement with Ukraine last week on an economic program that includes a $2.2 billion credit, to be disbursed over three years beginning in early September. The program calls for deep cuts in the budget deficit and steep reductions in the rate of inflation, setting targets that will require massive economic reforms to achieve. The parliament, however, seems interested only in increased spending. Like Russia’s Boris Yeltsin, President Leonid Kuchma may soon have to choose between defaults and decrees.