PRESIDENT RECOMMENDS GOVERNMENT TO IMPLEMENT BUDGETARY PROGRAM STRICTLY AND RUN FINANCE PRAGMATICALLY

Ukrinform`s photo

In his exclusive interview for UKRINFORM, President Viktor Yushchenko spoke about the most topical issues for Ukraine, both in the foreign and home policy where the main challenge now is sharp inflation development.

Analyzing antirecession measures proposed by Yulia Tymoshenko's Government, President Yushchenko stressed that in 2008 Ukraine had quite difficult inflation situation. The rise in prices for foodstuffs in January totaled 4.4 percent, while there were some 8.3 percent over the two month. "To my mind, this is the most severe inflation process Ukraine has been facing nowadays, especially in the product component of retail prices," he noted saying the inflation monetary factor is minimal.

Obviously, the annual inflation rate needs revision, the president said reminding the two-month inflation has already reached 5.7 percent.

According to Viktor Yushchenko, one of the reasons for the current high inflation rate is that during 2007-early 2008 the prices on the foodstuff market were "regulated enough", especially on the grain market, where the Government even resorted to absolute restrictions of the product movement abroad last year.

Now, the president says, the government and the power face a big problem: how to defuse the conflict among the market nature of relations on the grain market and cereals products and those restrictions Ukraine has been experiencing over the last 4-5 months.

President Yushchenko does not rule out that the global price rice for energy resources had influence on the price surge on the domestic market of Ukraine as well. All the more, the gas component of the energy balance is of urgent importance for Ukraine, however the component "has no conclusion so far" and, according to the president "it is in the deadlock".

Yushchenko believes the power should be more frank in assessing the gas market situation. "And the matter concerns the fact that today's domestic price on the basis of which a gas is sold, including that of the national producer, is lower over the prime cost. All the activity of NaftoGaz of Ukraine NJSC on the domestic market is unprofitable," Yushchenko stated adding the declared in 2007 and early 2008 pricing policy "needs efficient coordination and very serious decisions in the government, particularly in NaftoGaz of Ukraine". If a "cheap gas policy" is continued, so the budget will have to allocate some UAH 6 billion of compensation annually. "To my mind, the approach is unreasoned and has no prospect," the president said.

He spoke for the path proposed by the National Security and Defense Council which envisages normalization of the NaftoGaz of Ukraine operation through restructuring of its debts to the budget. The current developments, when UAH 8 billion of compensation to NaftoGaz for the difference between the gas purchase price and the price on the basis of which it was selling to the population, has not been offset both by the government in force and the previous one, "affect the NaftoGaz work". Apart from this, the situation prevents NaftoGaz from investment activity intended to increase own gas production.

Having noted that the budgetary charges grew by 75 percent over the last two months year-on-year, the president urged the government and the National Bank to review the situation on the domestic market and "provide for more efficient approaches to forming antirecessionary measures". "Spending behavior, demand formation behavior - this are the government's terms of reference and these should be regulated as the budget envisages," he pointed out.

"I would like to recommend the government to ensure pragmatic finance management first of all, follow absolute strict discipline of the budget fulfillment in 2008 - monthly, quarterly, and make particular changes taking into account the things that have happened over the last two months in the country's budgetary and economic life," the Ukrainian president stressed.

UKRINFORM