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Ukraine: New Government Program Envisages Major Reforms

By Katya Gorchinskaya

Kyiv, 14 May 1998 (RFE/RL) -- Ukrainian Prime Minister Valeriy Pustovoytenko says, as a part of a program to reduce spending significantly, the government staff will be reduced by up to 20 percent. Pustovoytenko made the comment yesterday to a group of foreign investors -- one day after a new leftist-dominated parliament was sworn in.

Pustovoytenko said the number of government ministries has already been reduced to 21 from 26, and financing of the cabinet's activities reduced by 10 percent compared to last year. Ukraine's government has announced a number of belt-tightening measures recently to try to reduce spending, and, resultingly, the budget deficit.

Pustovoytenko also said the current priorities for the government are: stabilization of the tax base, deregulation of the economy, decreased state control over foreign trading, and increased cooperation with international lending organizations.

Pustovoytenko said the government had drafted a new tax code and hopes parliament will pass it soon. Other goals he outlined included continued privatization in the agrarian sector and pension reform. He also called for setting up special economic zones this year in Crimea, Donetsk, Transcarpathia, Volhynia, and other regions.

Pustovoytenko said the results of the parliamentary election could bring about "stronger political stability" in Ukraine. He said "there are reasons to believe mutual relations between the branches of government will improve." He added that he believes this would serve to improve the investment climate in the country.

Central Bank Recovering from 'Asian Flu'

Ukraine's Central Bank governor, Viktor Yuschenko, says the bank has been able to stabilize the country's banking system this year, and confront the negative effect of the financial crisis, which took place in Ukraine after last year's Asian markets and currency crises. Yuschenko yesterday also addressed the group of foreign investors.

Yuschenko said "the existing stability of prices and the currency form the basis for a stable investment climate in the country."

Yuschenko said, as a part of the belt-tightening measures announced by the government, the inflation target for this year will be ten percent. And, he said the Central Bank has also been working on increasing stability of Ukraine's banking system. He said the Central Bank this year has performed its first inventory of commercial bank loans, and, resultingly, has urged banks to increase reserves in order to protect customers from the possibility of a bank's collapse.

Yuschenko said Ukraine, "will also have to speed up creation of a fund to ensure deposits." He said the Central Bank has drafted a presidential decree on creation of such a fund, which, he said, is being examined by the Justice Ministry.

Privatization of Telecom

Ukraine's government hopes to start privatization of the country's telecommunication giant Ukrtelecom this year, said Pustovoytenko. "Privatization of communications enterprises is one of our top priorities," he said. Pustovoytenko said the government and the State Property Fund have already drafted a law on privatization of Ukrtelecom, and that the law has been submitted to parliament for approval on priority basis.

Experts note that the leftist-dominated parliament will first have to amend the law which lists Ukraine's strategic companies that are banned from privatization. "Now, it's very difficult to say what (the parliament) position is on the issue, especially with all those independents (unaffiliated deputies)," a Western telecommunications privatization expert (anonymous) tells RFE/RL.

Pustovoytenko said the state would keep 51 percent of the company's shares for at least first five years after privatization, and sell 25 percent plus one at an open tender. He did not specify what would happen to the rest of the shares, but observers believe a part of them would be sold on a preferential basis to Ukrtelecom's workers and management, a part might be sold at stock exchanges, and a part through certificate auctions.

The head of the State Property Fund, which administers the privatization program, Oleksandr Bondar, told the meeting that the Fund has brought more than $100 million to the budget, so far, and total revenue anticipated from privatization this year is $500 million.