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Strategic Goals of Government Policy

  • Human development;
  • Reduction of the poverty level and increase in the nation’s wealth;
  • Increase in competitiveness of national economy;
  • Ensuring of the rights and freedoms of the individual, the citizen, society and the state;
  • Ukraine’s integration into the European Union.

Main Steps of the Government on the Start of the New Policy

  • Non-deficit budget and severe expenditures restraint;
  • Foreign debt restructuring, allocation of funds for social development;
  • Stability of hryvnia under floating exchange rate — reliable reference point for businessmen;
  • Availability of banking credits.

Directions of Social Sector Reform

  • The President approved the Government’s Main directions of social policy till year 2004;
  • Minimum wage was raised to 118 hryvnas starting on July 1, 2000;
  • Funds for mandatory state social insurance in case of unemployment and accident were created. Laws on pension insurance and social insurance in case of temporary loss of health were drafted;
  • Indexing of income for state financial support to single disabled citizens was implemented;
  • Minimal social standards to be implemented starting in 2001.

Quality of People’s Life

  • of real GDP by 5,0% versus January-June last year;
  • real incomes by 11,6% in January-June (last year 11,8%).

Directions for pension system reforms

  • Pension indexing;
  • pension expenditures by almost 800 mill. hrv. versus the same period of 1999;
  • First steps were made to implement pension system based on level of contribution;
  • Personifying registration of Pension Fund revenues was implemented in 550 districts and cities of Ukraine and involved 18,9 mill. people (around 90 percent of all employed).

Social Security

  • Expenditures on education, health care, social security 1.5 percent as % of GDP, versus January-May last year;
  • almost twice the financing of State Social Security System for disabled versus 1999;
  • 2,9 million families received subsidies for communal services, totaling 176 mill.hryvna per month;
  • 2,8 million families received assistance for children totaling 50 mill. hryvna per month;
  • 24 centers for rehabilitation of disabled children, 284 programs for support of orphans and disabled children are now in place;
  • 278 hostels for elderly work on a permanent basis and 725 territorial centers of social services now in place providing services for 570,000 elderly at their homes.

Paying Down Wage and Pension Arrears

mill.hrv.
June 1, 1999
June 1, 2000
01.06.2000 as % to 01.06.1999
Wage arrears*
7013,5
6355,6
90,6
Wage arrears in Government sector of the economy
2817,8
2171,4
77,1
Including out of budget funds
857,9
482,1
56,2
Wage arrears in Non-government sector
4195,7
4184,2
99,7
Excluding agricultural sector
2255,9
2052,6
91,0
Pension arrears and pecuniary aid arrears
2175,1
1059,6
48,7
Stipends arrears and cash security to students, cadets, pupils
94,7
15,7
16,6

* as of 10th day.
Source: Ukrainian state Statistics Committee.

Development of Education

  • New content and structure of general secondary education with 12-years time-framework;
  • Guaranteed provision of textbooks for new university entrants starting on January 1, 2001;
  • Long-term credits at low rates for higher education (1500 places for next school year);
  • expenditures on education by 0,4% as percentage of GDP versus over 6 month of 1999.

Employment and Labor Market in January-June of year 2000

  • almost 4 times rate of increase in registered unemployment;
  • youth unemployment by 4% since the beginning of the year;
  • overall amount of registered vacancies by 1,5 times since the beginning of the year;
  • of unemployment benefits from 47,6 hryvnas in January 2000 up to 51,85 hryvnas in June;
  • full paying down of the unemployment benefit and financing of employment programs.

Economic Growth

Economic conditions in the 1st half of 2000 have been the most encouraging since the beginning of reform process.

Indicators
Іst half of
1999
Іst half of
2000
GDP (January-May data)
-4,5 %
+5,4 %
Industry
-1,1 %
+10,8 %
Leaders in growth
Light
Food
Woodworking
Non-ferrous
Ferrous
Engineering
-2,9 %
+4,6 %
+13,3 %
+1,4 %
-3,5 %
-5,3 %
+33,8 %
+30,6 %
+34,6 %
+20,9 %
+18,6 %
+9,1 %
The amount of sectors (out of 10 main sectors) that their production has increased
4
8

Sectors - Leaders in Growth

Creation of Macroeconomic Conditions for Growth. Balance and Predictability of Government Budget

  • Budget consolidates all non-budget resources and funds, including social insurance;
  • Number of budget fund trustees is reduced by 3 times;
  • Commission of local authorities expanded;
  • Control over revenues and expenditures increased;
  • Elimination of non-cash tax payments.

NBU Interventions and Exchange Rate

Macroeconomic Objectives for the 1st Half of the Year are Implemented

  • Production increase has ensured budget revenues and allowed to increase social payments but ...
    short-term factors are being exhausted:
  • Inflation is higher than devaluation (January-June 18,7% versus 4,25%);
  • Imports substitution opportunities are shrinking;
  • Recession of 1999 has been overcome and production levels of 1998 have been reached.

Risks to Future Growth Prospects

  • Problem of nonpayments persists;
  • Limited progress to date in reforming key sectors of energy and agriculture;
  • Financial and banking systems remain weak;
  • Moderate progress in restructuring and production modernization.

Government Actions Towards a More Competitive Economy

  • Improvement of the legislative base for the implementation of competitive relations in the energy, agricultural and other markets;
  • Implementation of procedures on resumption of debtor solvency and declaration of bankruptcy;
  • To support business and promotion of enterprises that form the “growth centres” in the economy;
  • Attraction of investments through the expansion of cash privatization and insurance market development.

Energy Market Functioning

  • Elimination of non-cash form of payments for energy;
  • Collection of money for consumed energy now comes up to 34,2%;
  • Use of clearing account for energy payments will increase control over them;
  • Diversification of oil sources in Ukraine; financing for oil pipeline “Odessa-Brody” and oil terminal “Pivdennyi” construction;
  • Tax privileges for imports of diesel and crude oil;
  • Implementation of tenders for oil, gas and coal.

Agricultural Sector: New Conditions of Functioning

  • Reforming of collective agricultural enterprises based on property rights;
  • Introduction of market mechanisms in the system of providing rural area with materials and machinery;
  • New mechanisms of Agro-Industrial Complex crediting: offsetting of the part of commercial banks credits by Government by 175 mill. hrv. (50% of NBU interest rate);
  • Remained credit liabilities as of June 1 are 689 mill. hrv.;  by 76,7% since the beginning of the year (over 1999 – by 18,5%);
  • Writing off and restructuring of preceding years liabilities of enterprises that were reformed;
  • Activation in forming and functioning of agricultural market infrastructure.

Reforming of Agricultural Sector

  • 11276 entities were reorganized , and 13279 new agrarian entities were created based on them;
  • 6,2 million people received certificates that prove the right for land share;
  • 5,6 million people (90 percent) set up agreements for lease of land shares and 4,05 million people (64 percent) for lease of property.

Tax Burden Reductio

  • Elimination of highway-user tax and centralization of amortization fund resources in year 2000;
  • Tax Code envisions:
  • profit tax from 30 down to 25-20%;
  • VAT from 20 down to 17%;
  • personal income tax from 40 down to 20-10%.