KUCHMA CRITICIZES PARLIAMENT'S REJECTION OF PRIVATIZATION BILL. Ukrainian President Leonid Kuchma sharply criticized the parliament on 5 February after it voted overwhelmingly to reject a privatization plan, AP reported. Despite that rejection, Kuchma had earlier decreed the legislation, which is due to take effect on 16 February. The legislature voted 227 to 48 against the plan, which would privatize 455 large and medium-sized enterprises and some 5,500 smaller firms. Many deputies are against the use of domestic state bonds as privatization payments and others want the parliament rather than the government to handle the privatization of strategic companies. Kuchma said "everything proposed by the president or cabinet is adamantly opposed." He said the parliament does not understand the urgency in "giving economic laws top priority." PB
UKRAINIAN FOREIGN MINISTER AGAIN PRAISES NATO, REBUKES MOSCOW. Boris Tarasyuk on 7 February again endorsed NATO expansion and argued that Moscow should not speak for Soviet successor states on matters related to the alliance, an RFE/RL correspondent reported. Tarasyuk, speaking at a security conference in Munich, made his comments after Russian Deputy Foreign Minister Yevgenii Gusarov criticized NATO enlargement. Tarasyuk said Kyiv rejects Moscow's attempt to draw a "red line" around the former Soviet Union by speaking for the successor states. Gusarov said later that Russia has no veto over the opinions of other countries. Tarasyuk said the alliance is an "essential instrument" for maintaining peace and stability. He added that closer political and military ties between Kyiv and Brussels will not damage Russian-Ukrainian relations. PB
GERMANY WANTS UKRAINE TO CLOSE CHORNOBYL.
German Foreign Minister Joschka Fischer urged
Ukraine on 6 February to close down the Chornobyl
nuclear power plant, ITAR-TASS reported. Fischer made
his plea at a ceremony in Bonn creating the GermanUkrainian
Forum, which was also attended by his
Ukrainian counterpart, Tarasyuk. Fischer said Germany will assist Kyiv in integrating into Western European structures. The previous day in Kyiv, Chornobyl officials said the last operational reactor at the plant will remain idle at least until 2 March owing to a delay in repairs. Ukrainian energy officials are holding talks in Kyiv with the European Bank for Reconstruction and Development about financing construction of two new reactors at the Khmelnytsky and Rovno plants so that it can permanently close down Chornobyl. PB
Moldovan Prime Minister Ion Ciubuc blamed his resignation last week on the difficulty of consolidating his cabinet owing to its diverse composition. Some local observers, for their part, pointed to his "incompetence." But regardless of the Ciubuc government's internal structure and competence, Moldova is beset by severe economic problems that would daunt any cabinet.
In 1998, for the second time in three years, positive economic growth was forecast but failed to materialize, largely because of factors beyond the government's control. GDP fell by 7.8 percent in 1996, after observers had predicted positive growth that year. The decline was generally attributed to the poor harvest.
Last year, the most visible problem was the Russian financial crisis, which began in August. While the government originally forecast GDP growth of 6 percent for 1998 (revised to 3 percent in June), it announced in December that it expected a GDP decline of fully 10 percent. That would make it the only one of the nine smaller CIS countries (that is, excluding Kazakhstan, Russia, and Ukraine) where GDP declined last year.
However, the Russian crisis was not the only factor that negatively affected Moldova's economic growth. GDP fell by 5.3 percent during January-June 1998. Pre-crisis Western forecasts for GDP growth ranged between -2 and +2 percent.
Moldova's economic problems reflect both its geopolitical environment and a period of retreat from reformist economic policy that began in 1997, after a solid start in the earlier post-independence years. Early achievements included relatively low inflation and a stable currency. Consumer prices increased by 23.8 percent in 1995 (December-to-December), the lowest inflation among the former Soviet republics, while the leu fell only slightly against the U.S. dollar, from 4.06 in April 1994 to 4.75 in July 1998.
That stability has been undermined by the Russian crisis. While consumer prices fell by 2 percent from January through August 1998, they rose by 8.6 percent in November alone and increased by about 10 percent for the year. Exchange rate movements have been particularly alarming, with the leu falling to 6.2 to the dollar on 30 October and 8.55 on 1 February. In a losing battle to prop up the currency unit, the national bank saw its international reserves fall from almost $365 million at the end of 1997 to about $150 million at the close of 1998.
The leu's nosedive has resulted in the collapse of the monthly wage from its June 1998 peak of $52. Even those low wages are often not paid: state sector wage arrears reached a record 638.2 million lei ($76.9 million) in December. While the official unemployment rate is only about 2.5 percent, the numbers on unpaid leave and working part-time are five times the number of unemployed.
Moldova is also behind on its payments to Russia's Gazprom, to which it owed $439 million at the end of 1998. Attempts to ameliorate this problem--for example, by giving Gazprom a controlling stake in Molodovagaz in October 1998 or paying off debt by transferring stateguaranteed bonds to the company (against the IMF's wishes) in September--have improved matters only temporarily.
The country had a trade deficit of $366.3 million during January-November 1998, compared with $284.8 million in the same period of the previous year. Especially worrisome is Moldova's continued trade dependence on Russia and the CIS, the former accounting for 60 percent and the latter 74 percent of its exports. Total exports were 22.5 percent lower in JanuaryNovember 1998 than in the same period in 1997, with big declines in the export of food, beverages, and tobacco.
The current account imbalance was $176 million (about 16 percent of GDP) during January-June 1998, compared with $149 million during the same period in 1997. Moldova attracts little foreign direct investment ($265 million cumulatively through 1997), and attempts to sell large firms to international investors proceeded fitfully in 1998, although enterprises producing cement, pharmaceuticals, and leather were sold. It is thus no wonder that Moldova has the second-largest foreign debt as a share of GDP in the CIS (after Tajikistan).
But there is one important positive indicator: relations with the IMF and World Bank are back on track. In mid-1997, the IMF had halted disbursements under a $190 million loan approved in May 1996 owing to concern over a growing budget deficit, slow privatization, and the failure to raise energy prices.
But on 11 January, the IMF announced the resumption of lending to Moldova, agreeing to disburse that month a $35 million tranche, and the World Bank is providing the same amount in support of privatization and structural reform. The IMF was pleased by both the passage of an austere 1999 budget and with the parliament's approval in December of the privatization of Moldtelcom and energy sector companies.