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President calls for budget within 30 days
Journal Staff Report

KIEV, March 15 – President Viktor Yanukovych on Monday gave the government 30 days to approve a realistic 2010 budget, a key demand from the International Monetary Fund for resumption of lending to the country.

Yanukovych, at a meeting with Prime Minister Mykola Azarov, also said the government must incorporate higher social payments, while perhaps cutting other spending to maintain narrow budget deficit.

Drafting a realistic budget is the key demand from the IMF for the resumption of a $16.4 billion two-year loan which the Washington-based lender suspended in November 2009.

“The first and the main thing, without which the IMF team would not even come to Kiev, is the approval of a realistic budget, which must be based on realistic forecast of revenue,” Ihor Umanskiy, a former acting finance minister, said.

He said higher social payments will probably cost the government 35 billion hryvnias in 2010, but it was possible to cut other spending to maintain a manageable budget deficit.

“It is possible to cut spending, including at the expense of slashing spending on the state bureaucracy,” Umaskiy said in an interview with Channel 5.

Fedir Yaroshenko, the finance minister who replaced Umaksiy on the post, on Friday called the state of Ukrainian finances “catastrophic,” but had flatly ruled out the threat of default.

Yaroshenko also cited a recent secret memo from Tetiana Sliuz, the head of Treasury, to the finance ministry, indicating there was not enough money to pay social security. He said the state-run Pension Fund, which pays social security to all retirees in Ukraine, has been running a deficit of 25 billion hryvnias.

Umaskiyt admitted the figure has been standing at 25.6 billion hyhrvnias.

“The real gap that there is at the Treasury has been caused by unbalanced Pension Fund,” Umanskiy said. “But the government, the finance Ministry and the Pension Fund will make sure all payments are made to the full extent.”

Former Finance Minister Viktor Pynzenyk, who quit a year ago due to disagreement with Tymoshenko over the size of budget deficit, said the government has been running a hidden budget deficit of about 100 billion hryvnias in 2010, a tree times the forecast.

But Umanskiy disputed that figure, saying the budget deficit has been standing at about 20.4 billion hryvnias in 2009.

Meanwhile, the finance ministry has used a trick in 2009 by counting some of the borrowing from the IMF and the central bank as regular budget revenue, which de-facto helps to reduce the official size of the budget deficit.

The government borrowed $10.6 billion, or about 85 billion hryvnias, in loans from the IMF between November 2008 and November 2009, also borrowing about 40 billion hryvnias from the central bank. (tl/ez)




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