KIEV, Dec. 25 – Ukraine’s economy is facing extremely tough environment in 2013 and it is a matter of “survival” for the government to spend money wisely next year, President Viktor Yanukovych said Tuesday.
He said Ukraine will seek to revive borrowing from the International Monetary Fund and the World Bank in order to pay mounting debt obligations that come due next year.
“Every budget hryvnia must be valued and appreciated,” Yanukovych told a meeting of regional officials in Kiev. “It will be a survival budget. And if there will be any economic growth, it would come only through savings.”
The comment underscores concerns over economic conditions in 2013 despite the government drafting the budget based on an optimistic scenario, which anticipates economic expansion at 3.4% on the year.
The economic recorded a contraction in the third quarter and is expected to grow less than 1% in 2012, well beyond the government’s original forecast.
Yanukovych addressed the issue days after opposition lawmakers had charged that the government had secretly changed main budget numbers and spending after the bill was approved by Parliament and before it was signed by the president.
For example, the opposition groups said the government had illegally increased spending on police by 1 billion hryvnias next year among other changes in 2013.
Serhiy Tyhypko, a former deputy prime minister in charge of social policy who was dismissed by Yanukovych last week, denied the allegations.
But Yanukovych specifically said that the government must focus on “rational use” of the budget money.
“The obvious requirement is the rational use of budget funds in 2013,” Yanukovych said. “The budget that was approved cannot suit everyone. Its main task is to prevent the deterioration of social protection in a difficult economic situation.”
Ukraine is expected to repay $9 billion in 2013, which makes the government’s job extremely difficult next year and requires resumption of borrowing from the IMF and the World Bank, he said.
“We expect to deepen cooperation with the international financial institutions – the IMF and the World Bank,” Yanukovych said.
Arseniy Yatseniuk, the leader of the opposition Batkivshchyna party, charged last week that main parameters of the 2013 budget – including budget deficit - were changed after it was approved by Parliament and before it was signed by Yanukovych.
The budget was approved without debate by the outgoing Parliament at its last-day session on December 6 and was signed into law by Yanukovych on December 17.
The budget deficit increased by 100 million hryvnias to 50.5 billion hryvnias in from 50.4 billion hryvnias before Yanukovych had signed the bill, Yatseniuk said.
Other major changes include increasing spending on police by 1 billion hryvnias, while spending on the Cabinet of Ministers had increased by 60 million hryvnias, or by more than 20%, to 334.5 million hryvnias, Yatseniuk said.
On the other hand, spending on social programs was cut by 20 million hryvnias, while hospitals handling rehabilitation of cerebral palsy patients had their budget reduced by 7 million hryvnias.
Spending on water supply infrastructure across Ukraine was reduced by 160 million hryvnias in 2013, Yatseniuk said.
Ukraine’s projected budget deficit at 3.2% of the gross domestic product – twice as much as in 2012 - is one of the main macroeconomic problems to be faced by the government next year, according to analysts said.
Other concerns include overly optimistic economic growth forecast of 3.4% on the year in 2013, which may de-facto further widen budget deficit if the government collects less in budget revenue, analysts said. (tl/ez)