Muted reaction in Kyiv to cuts in U.S. assistance (02/16/03)

Muted reaction in Kyiv to cuts in U.S. assistance

by Roman Woronowycz
Kyiv Press Bureau

KYIV - Ukrainian lawmakers, reacting to a reduction in U.S. foreign aid proposed by the Bush administration, said they did not believe the proposed cuts would adversely affect Ukraine in general, although they could hinder the further development of democratic institutions in the country.

The White House announced on February 3 that it would reduce foreign aid to Ukraine in fiscal year 2004 from $155 million this year to $94 million next year, part of a 24 percent decrease in U.S. government assistance to the 12 former Soviet republics. Some of the reductions have been ascribed to a shifting of strategic policy away from Ukraine and Russia, which also suffered a large reduction, to the Central Asian countries near Afghanistan's border.

However, U.S. Ambassador to Ukraine Carlos Pascual said on February 6 that the reduced aid, primarily in FREEDOM Support Act funds, would be a result of success in the transformation of Ukrainian social institutions and the country's move towards a market economy. Mr. Pascual explained that Ukraine had reached "a certain level of financial independence," which allowed for the reduction of U.S. funding He added that some of the lost aid would be picked up by existing State Department programs, while others, such as efforts to promote civil society, an independent mass media and small business development, would continue, as would an HIV-AIDS prevention program and an effort to stop trafficking in humans.

Kyiv's reaction was even-keeled. Ukrainian experts and lawmakers said the reduced U.S. funding, which comes at a time when relations between Washington and Kyiv have only begun to rise from their lowest point in a decade, would have little impact on budgetary programs or the economy's development, but could hamper other areas.

Volodymyr Sydenko, economic expert for the Razumkov Center for Economic and Political Studies, pointed to the possibility that institution-building efforts, funded to a large part by United States, could be hampered by the aid cuts.

"For the most part, this will affect the development of institutions, first of all those associated with government, and in this context will lead to a search for new alternatives," explained Mr. Sydenko.

The economist added that reduced funding could even be healthy for Ukraine and rouse government organizations that had become too dependent on annual U.S. handouts they had come to consider as a fait accompli.

Viktor Kapustin, an aide to the Verkhovna Rada's chairman of the Committee on Finance and Banking, Serhii Buriak, said neither the economy, which was growing for a fourth consecutive year, nor the budget relied as they once did on foreign funding and would not feel the affects of the cut in aid. Mr. Kapustin explained that the funding in question was outside the budgetary process and legislators did not consider it when approving an annual budget.

Mr. Kapustin also said that he did not consider the funding reduction a reflection of U.S.-Ukraine relations inasmuch as Russia and Kazakstan also would receive reduced amounts of aid.

"Ukraine was one of the major recipients of U.S. aid in the course of the last 10 years," explained Mr. Kapustin. "Today, when the economy is more or less working well and the hryvnia remains stable and our democratic institutions are developing, we do not need as much aid. It is all very normal."

But not all opinions were as optimistic. National Deputy Petro Poroshenko, chairman of the Verkhovna Rada's Budget Committee, voiced reservations on the timing of the reduced U.S. foreign funding.

"First of all, we do not welcome the reduction of financial aid to Ukraine at a time when the country is in a situation where the restructuring of the financial and budgetary system is not complete and as economic restructuring continues," explained Mr. Poroshenko.

However, the lawmaker added that he was satisfied that at least most of the funding cutback was directed at government sector reforms and not NGO programs. He even expressed hope that the reduction of aid to government structures would force reforms that would finally lead to more streamlined and efficient functioning, as well as less corruption in the government bureaucracy.

On the other hand, explained Mr. Poroshenko, the possibility remained that reduction of reform programs could lead to a contrary result and an increase in inefficiency and corruption.

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