End Note: UNCERTAINTY PERSISTS ABOUT UKRAINE'S ECONOMIC
UKRAINIAN GOVERNMENT TO PAY CURRENT WAGES TO MINERS. Deputy Prime Minister Anatoliy Holubchenko told the Supreme Council on 2 June that the government will pay current wages to miners, Ukrainian Television reported. According to a protocol signed by the government and some miners trade unions, the government will allot 400 million hryvni ($200 million) from the budget and take out a 400 million hryvni loan from the National Bank to pay wages for May through the end of the year. Holubchenko added that the government is currently unable to pay Ukraine's total wage arrears, which amount to 6 billion hryvni. Also on 2 June, the Supreme Council passed a resolution instructing the Cabinet of Ministers and the National Bank to report by 9 June on the country's financial situation. JM
UKRAINIAN LEFT-WING DEPUTIES WANT TO UNSEAT CABINET. Leftwing parliamentary deputies have collected 191 signatures supporting a motion of no confidence in Valeriy Pustovoytenko's government, Reuters reported on 2 June. Under parliamentary rules, a third of the 450-seat parliament must agree to table a motion, while a simple majority is enough to pass it. The final decision on whether the vote will take place will be made on 10 June. Reuters suggest the motion is a political maneuver by left-wing deputies trying to bring pressure on parliamentary parties that support President Leonid Kuchma. Those parties have blocked three attempts to elect a leftist speaker. JM
UNCERTAINTY PERSISTS ABOUT UKRAINE'S ECONOMIC PROSPECTS
The Ukrainian government last week announced its intention to cut the planned budget deficit for 1998, saying the move marks the beginning of a new wave of reforms. But the announcement stopped short of providing details, leading to doubt whether the measures will ever be fully implemented.
The 29 May announcement said that the deficit will be cut to 2.3 percent, down from the 3.3 percent level approved by the parliament in December. Officials said more reforms will follow immediately, as the cash-strapped government tries to qualify for a three-year $2.5 billion loan from the IMF.
The decision to cut the deficit was prompted by the rapidly worsening financial situation. The IMF and the World Bank suspended their aid programs in April, after the budget deficit in the first three months of this year doubled the planned target of 3 percent.
Most affected has been the market for Treasury bills (T-bills), issued by the Finance Ministry to finance the budget deficit. The ministry's payments for maturing T-bills have exceeded the funds raised from issuing the new debt this year, reflecting foreign investors' reluctance to purchase the T-bills. Last year, foreign investors had held half of Ukraine's T-bill market but were purchasing only 10- 25 percent of the securities in recent months.
Unable to restore foreign investors' interest in the T-bill market, the government borrowed more than $1 billion internationally in February and March at a high 16 percent interest rate to cover budget losses and pay off some wage arrears in the run-up to 29 March parliamentary elections. The exodus of foreign investors from the T-bill market forced the National Bank to spend up to $1 billion to prevent the hryvna from falling.
But many observers say the government must start now raising more than $2.5 billion to pay off mature T-bills and foreign debt in the next three months. This could lead to a drop in the value of the hryvna after 20 June, when first debt payments have to be made. The Finance Ministry can now sell only T-bills whose maturity period does not go beyond 1998, and analysts say that the government may again try to borrow at a high interest rate to cover its outstanding obligations amid growing concerns that the country may eventually go bankrupt.
"The government behaves like the passengers of the 'Titanic,'" said Volodymyr Dubrovsky of the Harvard Institute for International Development, alluding to the government's persistent policy of acquiring new loans to pay off old debt.
Meanwhile, serious structural reforms are still only being talked about. "We started talking about liberalization of foreign trade, bankruptcy regulations, and new taxation policies five years ago," said Vitaly Migashko of ING Bank Ukraine. "Can anyone say today that at least some of these measures were introduced adequately?"
At the beginning of the year, the government announced plans to lay off thousands of government employees by the end of the year to reduce budget expenditures and implement a number of deregulation measures. However, many of these measures are still to be put into effect months after they were first discussed.
"What dominates the current cabinet is concern with its own interests," said former Economy Minister Viktor Suslov. Having won election to the parliament, Suslov resigned from the cabinet last month, after criticizing the anti-reform stance of its many departments.
The situation may be further exacerbated by tense relations between the government and the legislature. "The newly elected parliament is not likely to be more friendly toward the government than the previous one," says liberal lawmaker Serhy Teryokhin, who was among the proponents of a radical tax reform discussed by the previous legislature. "And with the government being politically and professionally weak, there are no reasons to believe in financial stability."
The government measures aimed to avert the financial crisis have to be approved by the parliament. But the legislature so far seems unwilling to do anything of the kind.
The author is a Kyiv-based RFE/RL correspondent.