OREANDA-NEWS. July 09, 2010. Negotiations of the management of the Government and the National Bank with the International Monetary Fund mission essentially ended.

The subject of the talks was a new programme of cooperation between Ukraine and the International Monetary Fund.

The previous Programme signed by the former state leaders – the President, Prime Minister - provided gas rates doubling for the population, significant reductions in social expenditures, retirement age increase, the permission to disconnect utility services for non-payment of utility bills, etc.

The former Government received in 2009 a loan worth about 20 billion dollars under this programme, but in vain. Ukraine inherited the world's largest economy shrank, living standards plunge, etc.

So, at the end of 2009 the International Monetary Fund has suspended the cooperation with Ukraine. And we when started to restore a dialogue with the IMF faced a huge distrust in the Ukrainian authorities. This was the main feature of two-month intense discussions with the International Monetary Fund.

So, why the current Ukrainian authorities persistently, patiently have been holding such arduous talks with the IMF?

It was because we received the country in a bad way, according to some experts – in hopeless one. We faced a lack of control over the public administration, total embezzlement of the state funds, destruction and chaos in the finances and real economy.

First, every month we had to pay almost 5 billion UAH of domestic debts. So it is necessary to add the actual bankruptcy of “Naftogaz of Ukraine" and other state monopolies, bleeding by debts and corrupt management.

Second, we are still being in the financial and economic decline. Although the economy is gradually recovering, but the level of GDP can not meet that level of budgetary expenses that Ukraine could afford during the pre-crisis period. And do not forget that the current statistical reporting data are comparing with the failed base of 2009 when, for example, in the first quarter GDP fall was more than 20%.

We all remember suspension of the chemical industry, metallurgy. So we have difficult work ahead to restore economic growth, moreover, I emphasize, quality growth.

Third, the recovery of the world economy is not as fast as previously estimated. Moreover, the budgetary and debt crisis in Greece, Spain and other countries led to the continued period of instability. International financial institutions had to do multibillion injections in these countries. And they had, in spite of internal protests, to reduce drastically social expenditures.

Fourth, the international financial markets, unfortunately, do not show the desired stability. All this gave ground to the world's leading economists to talk about the possibility of a second wave of the crisis. In this situation, our Government has no right to hide like an ostrich - as did some figures who assured from TV screens that the crisis would not affect Ukraine, and the authorities close the door before the downturn.

Quite the contrary – the irresponsible leadership flung the door wide open to the crisis. Ignoring obvious signals of the crisis’s coming became the record economic collapse for our country, devaluation of national currency, a sharp decline of living standards, huge personal losses of our citizens - the second time since the collapse of the Soviet Union. The country can break down through another crisis. Therefore, our duty is to make everything possible and impossible to prevent or minimize a potential impact of the second wave of the global financial and economic crisis.

Our Government is not going to turn a blind eye on the obvious risks. We must prepare the country to create the necessary reserves, concentrate financial resources. Our Government had no right to negotiate with the IMF irresponsibly, on the principle of the predecessors: more promising, less doing. We were obliged to restore confidence in the Ukrainian authorities and prevent our people from potential financial and economic turmoil due to the external assistance.
Moreover, we should ensure domestic insurance, a margin of public finances. That means to take measures that will save the state money for emergency needs.

So, today we will consider a decision to reduce expenditures in 2010 on the public administration and other needs. However, the Government is developing additional measures of additional social protection that will help the Ukrainian society to withstand a potential economic and financial turbulence in the outside world.

I note that an important element of such protection consists in the recovery of the pension provision.

Predecessors left us a huge gap of income and expenditures of the Pension Fund. The state will direct all possible funds to support the Pension Fund. But the main support consists in the fact that all employees will contribute to the Pension Fund, because each of us is responsible for the support of those citizens who can not work any longer. And nobody has a right to stand aside.

Dear members of the Government! Thus, we see that the economy has begun to recover and now the agency “Fitch Rating" has raised Ukraine's rating to the level B. The domestic market is slowly coming out of the deep crisis. It is very important to speed up the economy at this point to reach the exchange of uneasy equilibrium for development. But, unfortunately, Ukraine does not possess enough funds for this. Such funds have the IMF, World Bank, European Investment Bank, EBRD. According to preliminary estimation, it is approximately 30 billion dollars per year. A programme of cooperation with the IMF is the path to these funds and therefore to international investment funds. If we receive such an access, Ukraine will overcome the protracted global recession stage normally.

Our economy will receive so-called “umbrella”, under which we upgrade our opportunities and implement reforms.

There are so many problems, that is why we vitally need a break. A good example is that Ukraine has become unacceptably vulnerable to natural disasters. Irregular work of our predecessors caused catastrophic consequences. The events of recent weeks prove this fact. Among the main reasons, firstly, there is the unsystematic funding from the budget within recent years. More funds had been allocated to the rectification of the consequences of floods than to their prevention.

Second, the irresponsible attitude of officials at various levels to perform their duties: from those who should control the validity of natural resources use or quality of projects’ construction to those who must monitor the effectiveness of budget funds use.

Today we will conduct an expanded meeting on a comprehensive national programme of population and territories protection against natural disasters.

This is a great programme for 5-7 years, aiming to restore dams, water regulating facilities, create new hydraulic engineering, landslide protection works, forest use, restoration of forests, etc. It requires huge funds. But at the same time this is guaranteed jobs for many years and guaranteed orders for domestic enterprises.

By the way, the situation, especially in the western areas exposed another problem: there is not enough labour force to restore normal life. This force today is working in Europe. Thus, the programme must include such a component as people’s return to work at home.

It is very important now to rally around the ideology of self-reliance, raising domestic production. We can not live a day-to-day existence, import meat and meat products by 0.5 billion dollars more than export, coal - by 0.5 billion more, polymers and plastics - by 2 billion and etc.
Do you understand what have we come to? We are importing not high-tech products, not new technologies but raw materials and goods with a low degree of processing. Continuing this way means for our economy to be second-rate.

In addition, this is the matter of the balance of payments security. I want to emphasize that the import substitution should be a cornerstone for any sectoral and regional development programmes that we can introduce under the "financial umbrella” of the IMF funds.

The top priority for the next two years through IMF funds consists in launching irreversible reforms. Today, a meeting of the Committee on Economic Reforms will be conducted by the President of Ukraine. That is how the current government creates a system of axes for Ukraine for the next period. That particular Programme of reforms will be a guide for the Programme of action for the Government.

Therefore, I emphasize that working groups will brief today the President about the schedules of reforms.

Dear colleagues, today the Government will consider draft decisions aimed at improving the management of budget funds, state property, implementation of infrastructure projects, improvement of personnel policy.

To effectively manage the energy sector reform we are forming the Interdepartmental Committee on Energy Development. Its task is to modernize the fuel and energy sector and energy saving.

The Government should consider a draft order on improving the capacity of major air gates of Ukraine and their transport links with the capital. Today Boryspil International Airport has two runways. Construction of the new Terminal D that must be completed in 2010 will increase the passenger traffic to 8 million people per year. The question of a new runway and construction of passenger rail service between Boryspil and Kyiv came up.

The Transport and Communications Ministry and the State Enterprise "Boryspil International Airport" have to prepare by August 15 2010 technical and economic feasibility of a runway’s construction, railway service between the airport and Kyiv – by December 1, 2010. Boryspil airport will allocate funds for the development of project documentation.

Effective implementation of the state policy in all spheres of life is impossible without a high level of public management. Unfortunately, in recent years, this problem only has been aggravating. To resolve it, the President of Ukraine set a target to create an effective system of further training and qualitative, professional training of civil servants. This issue is extremely important in the context of enhancing the role of local communities and their administrations.

The Government has developed a regulatory document that provides the establishment of the effective system of training, retraining and advanced training of civil servants and local government officials. It will be considered today.

There are also on the agenda draft decisions of the Government aimed at improving the management of funds allocated from the state budget for the Youth Housing, for works on Euro 2012, development and modernization of the customs system, procurement and installation of specialized medical equipment at the Center for Children's cardiology and cardiac surgery, carrying out extensive repair works on water retaining structures, etc.