KIEV, June 2 – Prime Minister Yulia Tymoshenko’s government may shortly start making drastic cuts in budget spending after encountering significant problems with budget revenue collection this year, a senior official said Monday.

First Deputy Prime Minister Oleksandr Turchynov said the sweeping spending cuts will be inevitable if Parliament fails on Tuesday to approve a bill that is aimed at increasing the revenue.

“We appeal to all lawmakers,” Turchunov said at a special agenda-setting meeting in Parliament. “We have to start the day of Tuesday by protecting not the government, but the financial system of Ukraine, pensioners… and to approve the bill.”

This is the first time that a senior government official has confirmed the budget has been experiencing significant revenue collection problems this year as had been earlier alleged by analysts.

The budget revenue collection was under strain this year after Tymoshenko had failed to sell some state assets amid her dispute with President Viktor Yushchenko over management of the State Property Fund.

The 2008 budget originally called for 9 billion hryvnias in revenue from selling the state assets, a half of the country’s budget deficit, which has been set at 18.5 billion hryvnias, or 2.1% of the GDP.

But the revenue collection problem aggravated significantly two weeks ago after the Constitutional Court had voted to suspend a number of bills that had originally outlined much of the revenue in 2008.

“It’s an unprecedented situation,” Turchynov said. “The system of public finances has been destroyed. Today we have [a budget deficit of] 141 billion hryvnias.”

Ukraine’s overall spending in 2008 was set at 294.2 billion hryvnias, or $58 billion, in the consolidated budget, which includes spending by the central and local governments.

The revenue collection problem signals difficulties for Tymoshenko’s populist spending initiative, such as spending of at least 20 billion hryvnias to redeem failed Soviet-era bank deposits.

The initiative, which is thought to have been designed to catapult Tymoshenko to the presidency in 2009, calls for spending of 120 billion hryvnias through the end of the next year.

Yushchenko and other officials criticized the initiative as the main reason behind skyrocketing inflation this year.

Parliament Speaker Arseniy Yatseniuk said the government must first submit amendments to the 2008 budget that incorporate greater-than-expected consumer inflation, something that Tymoshenko had so far refused to do.

“Let me once again stress that new bills will not be debated until we have budget amendments submitted,” Yatseniuk said. “There will be no other agenda.”

But the failure to approve the government’s bill on Tuesday will probably trigger draconian cuts in the spending, according to Turchynov.

“Any decision by Parliament will mean a position for the government,” Turchynov said. “Either you keep the 9 billion hryvnias [in privatization revenue], or we will be forced to cut budget spending.”

“And, in this case, believe me, our hand will not falter. We will cut everything that we can, including [spending on] the Cabinet of Ministers, on Parliament and on the office of the President. That’s because we are not going to cut social programs.” (tl/ez)