Ukraine's Belated Attempt at Economic Reform Wins Boost
KIEV, UKRAINE — SHOPPERS at Bessarabsky Rynok, Kiev's best-known farmers' market, do a lot more browsing than buying these days. One can hear gasps of disbelief as people walk through the colorful aisles inquiring about prices of meat, vegetables, and fruit. A single kilogram of these would gobble up most of their month's wages.
Only foreigners and the few Ukrainians with hard currency can afford to actually buy anything here now. And prices at state stores, although lower, have made many staples simply unaffordable for many residents of the capital.
In its efforts to address this crisis, Prime Minister Leonid Kuchma's government won a key battle yesterday, persuading parliament to approve its economic restructuring plan for 1993.
The plan is the ideological base for 40 reform decrees Mr. Kuchma has issued since December and 40 more planned for this year. But Kuchma still faces a battle over individual decrees opposed by Socialists and industrialists, and he acknowledges that there is no quick fix.
"As I have said and will say again, we have no other choice," Kuchma told reporters last week. "We have no other choice but to live worse now in order to live better later."
"This is probably the most important battle Ukraine has had to confront since it's become independent," Canadian economist Bohdan Kravchenko, an adviser to Ukrainian President Leonid Kravchuk, says of the struggle over reform.
Ukraine's economic woes are hardly unique among the former republics. Following the breakup of the Soviet Union and its heavily integrated economy, all have experienced inflation, a sharp drop in production, and budget deficits. Kuchma inherited a budget deficit of 44 percent of gross domestic production, a 9 percent fall in production, 2,000 percent annual inflation, and an almost complete loss of control over state industries.
But Ukraine has lagged behind other republics in implementing reforms. Only in October did reformists - led by Kuchma - succeed in winning key positions in the Cabinet of Ministers. In December, parliament granted the young economic team additional powers of decree to deal with the economic crisis and the legacy of corruption and mismanagement left by the former government.
The decrees issued since December have slashed subsidies to state industries and reduced social benefits to all but the neediest segments of society in an effort to cut the budget deficit.
WHILE the new Cabinet has issued a decree regulating prices of the many Ukrainian monopoly producers, it has stressed that the parliament's continued practice of printing money to provide more aid feeds inflation.
Kuchma's policies have enjoyed the support of key political organizations such as the centrist New Ukraine and conservative-nationalist Rukh groups, but they have drawn the ire of the industrialists' lobby, which is unhappy with strict controls over the management of large state firms.
The industrialists, along with Socialists in parliament who represent labor unions angry at the falling standard of living, have organized mass rallies in several cities and launched an attack on key decrees.
The government insists the decrees are necessary to wrest control of state industries away from managers who often run the firms as their personal fiefdoms, and to move toward privatization.
"These factory directors want to be perennially subsidized and this is their last cry," Mr. Kravchenko says. "But people want to see the light at the end of the tunnel and [the factory directors] offer no alternatives, except to simply keep printing more coupons," as the currency is known here.
Deputies in parliament already have begun an attempt to overturn some decrees, a move the government says will undermine the whole process of reform.
"The problem is, if one decree is blocked, this affects, even threatens, the whole package," Economics Minister Viktor Pynzenyk told reporters last week. "This is a comprehensive package of measures aimed at stabilizing the economy and ... beginning structural reforms."
Kuchma seems realistic about the prospects for financial aid from the West, and he harbors no illusions about Ukraine's relations with Western Europe.
"The West is not exactly waiting for us. We must integrate into the countries of the former Soviet Union, including the Baltic states, but on a new equal basis," Kuchma said last week. "I don't expect aid from the West. I believe in our own strengths and talents to establish normal economic ties and emerge from this crisis."