Publication: Monitor Volume: 5 Issue: 59

On March 23 Premier Valery Pustovoytenko announced the introduction of a “special economic management” plan for the Ukrainian government, to go into effect on April 1, with the goal of paying the country’s huge and growing wage and pension arrears. It seems a valiant but virtually impossible effort. The measures include: (1) rolling the currency printing presses, which carries the danger of unleashing inflation and devaluing the national currency; (2) canceling import duties for joint ventures; (3) canceling all taxation privileges for commercial enterprises; (4) restricting banking interest rates; (5) uncovering legal violations in the most lucrative sectors, including the energy, oil and gas and coal industries with the help of law enforcement agencies; and (6) forbidding enterprises to hold more than two bank accounts, to facilitate tax collection. The government also announced plans to raise money by selling twelve industrial giants (in metallurgy, machine-building and power engineering, which had earlier been excluded from privatization as “strategic enterprises”) as soon as possible, and the communications monopoly Ukrtelecom by the summer (AP, March 22-23; Ukrainian television, March 23; Segodnya, March 24).

The government is obviously worried by its lack of progress with the economy, which is continuing to weaken, marring President Leonid Kuchma’s prospects in the October elections. The decline in the gross domestic product accelerated from 3.3 percent in January to 5.1 percent in February, while the industrial output plunged 1.8 percent and unemployment rose 4 percent. The cabinet’s plan, however, does not appear to be either carefully formulated or balanced.

Viktor Yushchenko, the usually diplomatic head of the National Bank of Ukraine, responded promptly and angrily to the idea of printing money. He called on the government to “stop talking about destabilization of the Ukrainian currency” and expressed grave apprehension about “a possible change in the government’s course [of action].” On March 24, Pustovoytenko apparently retracted his fears, assuring the visiting representatives of DeutscheBank that currency emission will not be a remedy for the wage arrears. Meanwhile, on March 23, parliament rejected the 1999 privatization program for the fourth time, effectively forestalling the government’s ambitious goals in this arena. The lawmakers also–defying the government’s proposed plan–decreased the duty on real estate sales, canceled the tax on mobile phones (earlier introduced by presidential decree) and cut excise duties on fuel. To be undertaken, most of the measures provided by the plan must be endorsed by the parliament, which clearly has no intention of doing so (Studio 1+1, March 23; Ukrainian 1st TV Channel, March 24; Den, March 25).–OV