Ukraine parliament passes critical budget bill

Dec 26, 2008, 15:00 GMT

Kiev - Ukraine's parliament on Friday passed a critical budget bill, marking the first legislative success of a new three- party ruling coalition.

A total 226 MPs in the 450-seat house - the bare minimum needed to pass any legislation - voted in support of a 2009 national budget planning politically painful social service cuts and other reduced government spending.

The three parties assembling votes to push the legislation through are a shaky alliance of pro-Europe MPs. The group tried and failed to pass the same bill on Thursday.

President Viktor Yushchenko in recent weeks repeatedly called on the legislature to pass a revised 2009 budget taking into account the effects of the world financial crisis on the Ukrainian economy. He must sign the budget bill to make it law.

A recent 16.5 billion-dollar loan from the International Monetary Fund (IMF) imposed additional conditions on lawmakers, forcing the legislature to include into the revised budget IMF-stipulated monetary, banking, and fiscal targets particularly unpopular with Ukrainian big business and rural residents living low fixed incomes.

Key features of the new budget include a maximum 3 per cent deficit relative total GDP, government collections of 30 billion dollars, spending of 36 billion dollars, annual GDP growth of 0.4 per cent, and inflation of 9.5 per cent or less.

The new budget's terms, though built on reduced economic expectations, nonetheless are according to government critics overly optimistic, foreseeing Ukrainian economic growth next year and inflation in the 10-per cent range.

The new budget bill's economic performance predictions are, according to independent observers, unlikely to pan out in fact given the Ukraine's shrinking industrial production, down 14 per cent over November alone.

Other worrying areas include weakening currency and falling international demand for industrial commodities making up the bulk of Ukraine's export earnings.