A leading reformer in the government warned on Nov. 29 he would not work in the new Cabinet if it fails to take the urgent steps needed to prevent a debt default next year and halt Ukraine's economic decline.
'If those who come to the government are only interested in occupying the posts rather than [conducting] reforms, I will not be interested to work in such a government,' Deputy Prime Minister Serhy Tyhypko said.
The Cabinet of Valery Pustovoitenko formally resigned, in accordance with the constitution, after the Nov. 30 inauguration of President Leonid Kuchma. A new government will be formed after parliament approves Kuchma's nominee for prime minister.
Tyhypko, 39, was appointed to the government in 1997 after working for five years at Privat Bank, one of Ukraine's largest. Responsible for mapping the Cabinet's economic reform strategy, he became known for his liberal reformist ideas, many of which, however, the government was slow to implement.
On Nov. 29, Tyhypko said Ukraine's economic slump had reached a point where radical reforms could no longer be put off.
'The policy of small steps and compromises which we have been pursuing is leading the economy to stagnation,' Tyhypko told a press conference. 'The time for compromises is over, now is the time for radical changes.'
Ukraine's economy has steadily declined on a year-on-year basis for a decade, and most analysts predict it will shrink further next year. Besides the gloomy economic outlook, Ukraine will face a debt crunch in 2000, with more than $3 billion to be repaid to foreign lenders.
Tyhypko said he has drafted a package of most urgently needed economic reforms, adding that a new reform-minded government was needed to implement them.
'Today we need a reform-minded government, not just reformists in the government, and we need every minister to introduce reforms in the sector he is responsible for,' he said.
Tyhypko's reform plan envisages a radical shake-up of civil administration, aimed at curbing the government's involvement in the economy, rapid privatization and rapid development of the private sector.
Tyhypko said the number of government ministries and other agencies, presently at 88, had to be cut by at least half, while the numbers of local state bureaucrats throughout the country also had to be reduced.
The government's next step should involve price liberalization and the elimination of government subsidies to selected businesses and individuals.
The hryvna rate should be allowed to float freely, while the government has to stop pressing the central bank to buy government bonds to help finance the budget deficit, Tyhypko said.
Tyhypko also said the government and parliament should approve an austere budget and badly needed bankruptcy regulations so the Ukrainian economy could more quickly rid itself of numerous inefficient Soviet-era factories.
Tyhypko said his reform plan paid special attention to the protection of private businesses from tax inspectors and other regulators, which Ukrainian entrepreneurs widely blame for ruining the business climate.
'We have to introduce clear regulations for actions of the controlling organs, and personal responsibility for their misdeeds,' he said.
Most of Tyhypko's reform proposals have for years been proclaimed by Ukraine's leaders as reform priorities, but they have implemented few of the measures – despite constant pressure from the International Monetary Fund and the World Bank to do so.
Tyhypko, a key Ukrainian negotiator with the foreign lenders, said he acknowledged his responsibility for the failure of reforms in Ukraine, but said 'certain political reasons' had kept him from speaking out before.
'But now is a very responsible time, and you cannot place your career plans and political ambitions ahead of the [need for reforms,]' Tyhypko said.
