Rada approves administration's new budget without opposition (04/03/05)

Rada approves administration's new budget without opposition

by Zenon Zawada
Kyiv Press Bureau

KYIV - Ukraine's Verkhovna Rada approved the nation's 2005 budget without any opposition, a major victory for Prime Minister Yulia Tymoshenko in her efforts to promote President Viktor Yushchenko's reforms.

The 2005 budget is widely described as the most socially oriented since Ukraine's independence, including higher allocations for pensions, government wages and financial aid for new mothers. President Yushchenko signed it into law on March 30.

Ms. Tymoshenko was exuberant after the confirmation vote in the Rada on March 25, raising her arms in victory and thanking the national deputies who voted 376-0.

"This is evidence that it's difficult but possible to find harmony in the Parliament between big business, entrepreneurs and others in society who aren't entrepreneurs," she told reporters after the vote. "Today the balance was found. It was difficult, but it was found."

Four deputies abstained and there were 48 no-votes, mostly coming from the Party of the Regions that opposed Mr. Yushchenko's presidential candidacy.

Not since Ukraine's independence had a budget been approved without opposition, garnering even the unanimous support of the Communist Party's national deputies, who had spent two sessions attacking the budget.

The budget wasn't prepared by economists, but "astrologists, who don't want to take into account that the economy is in its deepest crisis," said Petro Symonenko, the leader of Ukraine's Communist Party, after voting in support of the budget.

The significant hikes in social spending are why many politicians were careful not to vote against the budget, observers said.

More than 80 percent of the budget's expenditures are socially oriented (compared to 49 percent in the 2004 budget), and critics accused the Yushchenko administration of doling out money in order to garner support in the 2006 parliamentary elections.

"Everyone wants to be loved by the electorate," said Valerii Asadchev, a member of the Rada's Budget Committee and the right-centrist Ukrainian National Party.

What made the budget such a balancing act was that it had to meet commitments made by the Yanukovych government, those declared by the new one, as well as commitments made during the election campaign, said Volodymyr Lytvyn, the Verkhovna Rada's chairman.

Among the social improvements is a 17 percent increase in minimum monthly pensions to $63 a month, and a 27 percent increase in the minimum monthly wage for government workers to $63 a month, said Viktor Pynzenyk, Ukraine's finance minister.

Middle-level salaries such as those paid to doctors, teachers and scientists, will improve by 57 percent, Mr. Pynzenyk said.

The budget also increases financial aid for childbirths by 12 times to $1,619 per child, aid for single mothers fourfold, aid to disabled children by 4.5 times and aid to orphans by 5.2 times to $89 per child each month, he said.

Cultural issues also emerged as a priority. Spending to support the Ukrainian language increased by 50 percent, Mr. Pynzenyk said, while spending for the Ukrainian diaspora will increase by 11 times.

Diaspora projects would include opening Ukrainian schools in the Transdniester, Mr. Yushchenko said. More than 200,000 ethnic Ukrainians live in the that region of Moldova.

In order to finance the $22 billion in total expenditures - an 18.3 percent rise from the prior year - Cabinet Ministers led by Ms. Tymoshenko targeted perks enjoyed by Ukraine's oligarchic entrepreneurs and industrialists.

Such perks are 11 free enterprise zones where businesses don't pay any taxes and 15 technology parks that don't pay import duties, value-added taxes or taxes on profit, Mr. Pynzenyk said.

During his budget presentation to the Rada, the finance minister pointed out that the AvtoZaz car maker in Zaporizhia is a Ukrainian enterprise that earned a profit of $133 million in 2004.

Yet the maker of Daewoo, Opel and Mercedes cars received a government grant of $384 million, Mr. Pynzenyk said.

In a speech laden with populist rhetoric and guilt trips that she delivered just before the budget vote, Ms. Tymoshenko urged national deputies, the majority of whom are millionaire entrepreneurs, to sacrifice their benefits in order to provide social spending for common citizens.

"If we need to force AvtoZaz to share, which received 2 billion (hrv) from the budget while earning 600 million (hrv) in profit, then have a conscience," she said. "I want for us to finally learn how to share with society."

Ms. Tymoshenko defended stripping these benefits by explaining that Ukrainian entrepreneurs enjoy some of the cheapest electricity, gas and labor costs in the world, and therefore have nothing to worry about.

Instead, Ukrainian companies and factories need to prepare themselves for actual competition in the global economy, instead of creating "these artificial, rosy conditions that prevent them from standing on their own feet," she said.

"The harder these entrepreneurs work within the competitive framework, the stronger they become," Ms. Tymoshenko said. "Protectionism makes them weaker."

Ms. Tymoshenko's urgings did not sway her opponents, who insisted the benefit cuts would hurt Ukrainian industry.

The Yushchenko government is making Ukraine's economy hostage to transnational corporations and global speculating capitalists, Mr. Symonenko said. "The government is finishing what Kuchma started - a deindustrialization of the nation," the Communist leader said.

The prime minister's oppoinents said the improved salaries and benefits pose inflationary threats, casting doubt on Ms. Tymoshenko's assurances that inflation would not increase more than 9 percent under the new budget.

Deputies also said they were concerned over the lack of a formidable opposition in the Verkhovna Rada to challenge the Yushchenko administration.

This was evident in earlier recent votes, in which a Rada majority upheld Ms. Tymoshenko's confirmation as prime minister and the Cabinet's budget without opposition.

"It's apparent there is no real opposition in Parliament," Mr. Asadchev told reporters following the vote. "That's not very good. It's good when there is a constructive opposition. The political field is unclear, and the government controls the parliamentary situation."

Perhaps the most significant voice of opposition was the president's own vice prime minister, Anatolii Kinakh, whose criticism of the budget became a mini-controversy. He said the budget contained chaotic changes.

"The changes, which apply to competitiveness, stimulants of our economy's development, attracting investment, innovation, in most cases did not have economic justification and a forecast of consequences," said Mr. Kinakh, who leads the Party of Industrialists and Entrepreneurs.

Overall, the budget had a deficit of $1.3 billion, a 21 percent improvement from the prior year's budget.

However, President Yushchenko and Ms. Tymoshenko are characterizing it as a non-deficit budget because funds raised by privatization will cover the gap.

"We expect to receive much more funds from privatization than planned," Prime Minister Tymoshenko said. "There won't be any back-door privatizations, and there won't be any entities sold at half-price. An open auction offers the ability to obtain a much higher value than planned."

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