Kuchma taps new finance chief in "reorganization" of key ministry (01/06/02)

Kuchma taps new finance chief in "reorganization" of key ministry

by Roman Woronowycz
Kyiv Press Bureau

KYIV - Ihor Mitiukov, Ukraine's long-time finance minister, was dismissed from his post on December 27 in what official sources termed a "reorganization" of the ministry. Ihor Yushko, who had been the state secretary at the ministry, replaced him.

Prime Minister Anatolii Kinakh made the announcement after meeting with President Leonid Kuchma and Verkhovna Rada Chairman Ivan Pliusch to review the recently completed budgetary process for 2002, which once again proved to be arduous.

Mr. Kinakh explained that not only did the approval process for the 2002 budget proceed unsatisfactorily but that there is concern that the new document may again be an unrealistic one. The central issue surrounding the 2001 budget was Mr. Mitiukov's inability to move forcefully on privatization, which would have helped to fill government coffers with revenues from the sell-off of government-held property and given the government the ability to meet its budgetary plan. In the end, the country had a 5.8 percent shortfall in expected revenues.

"If the country's main financial document for this past year was increased by 5.8 percent over 2000 and was not fully executed, then next year's budget is greater by 25.8 percent," said Mr. Kinakh.

Mr. Mitiukov, who had run the ministry since February 1997, was criticized also for his inability to push the new Tax Code through the Verkhovna Rada, which would have provided additional revenues as well. A government priority for 2001 was to develop the 2002 budget based on revenues generated by the new code. The draft bill, with hundreds of unresolved amendments attached to it, currently remains stuck in a parliamentary committee.

Other sources, however, stated that the ultimate reason for Mr. Mitiukov's dismissal was preparations for the upcoming parliamentary elections. National Deputy Valerii Asadchev, a member of the Parliament's Budget Committee who belongs to the Rukh faction, said the finance minister sealed his fate when he refused to make allowances in the new budget for expenditures that would be needed to support certain political parties or individual candidates in the upcoming parliamentary elections, what is commonly known in the country as "administrative resource."

"Someone had placed great hopes on the possibility that the Finance Ministry would form the budget with allowances to hide additional finds, to be used later for the needs of election campaigns; that the budget would be thrown at the feet of those who needed to use administrative resources," explained Mr. Asadchev, according to a Ukrainian National Rukh press release.

The value of Ukrainian Eurobonds - the bond issuance the Ukrainian government developed to finance its current debt and which is sold to European banks - fell on the European market from 94.5 euros to 93.5 euros with the news of Mr. Mitiukov's dismissal. He and former Prime Minister Viktor Yuschenko were responsible for working with several large European banks to achieve a successful rescheduling of a good portion of Ukraine's international debt in early 2001, which contributed much to the continued expansion of the Ukrainian economy and a controlled rate of inflation for the year.

Mr. Mitiukov, who belonged to no political party and for the most part refrained from political commentary during his five years in office, was known to have had a close relationship with Mr. Yuschenko. But he was also a political survivor, one of very few government ministers who had continued on through several governments during the seven years of the Kuchma presidency. Prior to becoming finance minister in 1997, Mr. Mitiukov had served as vice prime minister for finance and banking in 1994-1995.

His replacement, Mr. Yushko, who has not yet resigned his seat in Parliament, is more closely associated with hardball Ukrainian politics. He is a member of the Regions of Ukraine Party, which is headed by State Tax Administration Chairman Mykola Azarov. Mr. Yushko also heads the Verkhovna Rada's Finance and Banking Committee.

One national deputy in Parliament, who wished to remain unnamed, commented that the dismissal of a finance minister and the appointment of another are just as much about Mr. Yushko's political connections as they are about Mr. Mitiukov's determination to remain apolitical.

"Regions of Ukraine today is one of the parties of power inasmuch as it is part of the For a United Ukraine election bloc," explained the national deputy. "And, as the country prepares for elections, certain forces wanted one of its own controlling the financial levers."

In taking over the reins of the ministry, Mr. Yushko, 40, will leave his post as state secretary, to which he was appointed by President Kuchma only on December 7, 2001. Earlier he was the president of the Donetsk-based First Ukrainian International Bank. He was first elected to the Verkhovna Rada in 1998. Since July 1999 he has been a member of the council of the National Bank of Ukraine. Mr. Yushko is considered one of the most influential and knowledgeable bankers in the country, a person who up to now did much of his work behind the scenes.

In his first public statement in his new post Mr. Yushko said on December 28 that the 2002 national budget will become realistic "only after resolute and radical efforts at tax reform are carried out."

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