Ukrainians will pay for… keeping oligarchy intact

The Verkhovna Rada has passed an IMF law package. Staying in session until Monday midnight, MPs voted six out of seven bills into law in the first reading. They only left for a second reading the Law No. 2214 on stabilizing the financial state of the Naftohaz Ukrainy joint-stock company.

In particular, MPs revised budget data. As a result, revenues are to rise by a solid 37 percent because of the hryvnia’s devaluation and inflation. It is also planned to increase revenues by raising rental payments for extracting natural gas at the depth of fewer than 5,000 meters from 20 to 70 percent.

The increased revenues will be spent on repaying the public debt which has also jumped due to devaluation of the hryvnia. Besides, low-income people will be assigned selective public utility subsidies. It will be recalled that raising the household gas price is one of the IMF’s main demands and, at the same time, a prerequisite for reducing Naftohaz’s budget deficit.

But the most debatable point was the draft law “On Introducing Changes to Some Legislative Acts of Ukraine on Pension Provision” (No. 2212 of February 23, 2015). MPs passed it at the fifth attempt only.

Under this law, working pensioners will have their pensions cut by 15 percent if they exceed 1,423 hryvnias. At the same time, the maximum pension for former state officials, such as public prosecutors, judges, taxmen, etc., is to equal 10 living wages for a disabled person, i.e., almost 9,500 hryvnias per month. Besides, controlling unit executives will be no longer entitled to a lump-sum benefit in case of death (until now – 10 annual salaries), grievous or light bodily harm (until now – five and one annual salaries, respectively) that occurred in the line of duty. The threshold of mandatory work experience for early retirement has also been put up by five years.

Yet MPs themselves believe that, although the hastily adopted laws will help Ukraine obtain money from the IMF, they will not solve the urgent problems in the economy and the country as a whole. “Unfortunately, I can say nothing positive about Ukrainian problems. They remain unsolved. As for a huge budget deficit and absence of safe sources to finance it in the existing limits, the government never dared to take a decisive step to solve this,” says Viktor Pynzenyk, a Petro Poroshenko Bloc (PPB) member of parliament.

“Obviously, the principle the government agreed upon with the IMF and implemented in its draft laws on changes to the state budget is perhaps worse than those applied to the other countries that received assistance from the International Monetary Fund. This principle is in fact turning Ukrainians into a society of poverty,” says Mykola Tomenko, deputy chairman of the PPB faction in parliament.

The Day asked some experts and MPs about how the government can ward off a negative public reaction to the forced “innovations” and whether there is an alternative to them.

COMMENTARIES

Serhii TARUTA, member of parliament, independent:

“These changes are nothing but populism and an attempt to please the IMF. We used the same rhetoric and arguments on the New Year Eve’s night to pass the budget and were saying that this would help us receive aid from the International Monetary Fund. We have not yet received this money. Having an ample experience of negotiations with the IMF, I am convinced that we could have made a deal and persuaded them that it is not the time now for this kind of shock therapy. The purpose of the latter is different. But we must begin to conduct a transparent and frank dialog with them.

“Secondly, we incur more losses from currency rate jumps. The losses from today’s devaluation of the hryvnia are so essential that it is absolutely inhumane to strip pensioners of their scanty pennies. If we have 2-3 percent of bad law-enforcers and officials, why should the other 95 percent suffer? All over the world, officials are tempted with good social benefits and pensions, while we are slashing these pensions. People worked in this sphere for so long because they were sure of being able to provide for their old age. Now they are deprived of this.

“First of all, we need to look for domestic reserves to make the economy work. But nobody invites now industrialists, agrarians, and businesspeople to discuss what the premier is doing. We have already twice had the problems we have now – first, in the early 2000s, when industrialists had similar difficulties and the government helped them. I can remember the 2008 crisis, when industrialists were summoned [for a discussion]. But now nobody cares about the real sector. Are we getting an IMF loan to ‘eat it up’ and run up new debts? Nobody answers. Instead, we are being blackmailed – if we do not vote, nobody will give us loans.”

Andrii NOVAK, chairman, Committee of Ukrainian Economists:

“Today, Ukraine is under external financial control on the part of the IMF. And no government submitted changes to laws and no parliament voted on them on Monday. This is a decision of the IMF mission in Ukraine, which issued an ultimatum to the Ukrainian leadership: either you introduce changes or you won’t get an installment in the near future.

“We are fully dependent on the IMF financially. For our relations with our creditors and investors depend on this cooperation. So, in principle, it is good that these legislative acts were approved.

“The trouble is that the Ukrainian Cabinet and the NBU, the two highest economic institutions of the government, have in fact done nothing to alleviate IMF demands for ordinary people. The Naftohaz deficit is also a longtime problem which the current government has not been tackling properly. The same applies to the Pension Fund deficit and the problems of state monopolists.”

“Unfortunately, the Ukrainian leadership is not making adequate use of the period of war and is blaming the latter for all of its failures – from the devaluation that brought about new billionaires to uncontrolled budgetary expenditures for the counter-terrorism operation, defense, and the Armed Forces of Ukraine.

“The Ukrainian economic leadership has placed the burden of war and economic instability on ordinary people, even pensioners. The point is the government manages to find ways to levy taxes on pensioners but fails to do so with respect to oligarchs. And we are in a situation when we cannot protest, for this would play into the enemy’s hands. In their view, we should bow our heads and accept all the ‘innovations’ which the government has introduced on the IMF’s demand.

“But it should be taken into account that the IMF does not demand concretely that public utility rates or pension age be increased. It only demands that the state budget’s revenues and expenditures be well-balanced. It also tells us where the most serious problems are. And the fact that we still have these problems is our own fault, for we haven’t been addressing them.”