Presidential Advisor Anatoly Halchynsky’s article ( see The Day #18) calls forth contradictory feelings. On the one hand, it is expected to be a source of first-hand information. On the other, the ordinary reader is disappointed.
Its style is strongly reminiscent of all those “post-Soviet” standard accounts providing dull statistics comprehended by a handful in the know, in which a multitude of “facts and figures” obscures the author’s personal view of what is actually going on. Thus, Mr. Halchynsky states that the “low-inflation-production-increment vehicle just did not work,” that the budget deficit reached a critical level, and refers to 1992 and other years. Keeping true to Administration mottoes, he arrives at the only “correct conclusion” that all stabilizing processes in the production sector will be bungled unless “radical changes” are carried out in fiscal policy.
However, this article leaves one wondering about the current administration being able to offer any options of supplementing budget income, paying back wages, getting over the nonpayment crisis, attracting investment in the way done elsewhere in the civilized world, etc.
The article does not answer what is correctly regarded as today’s major question: Is the Presidential Administration aware of how dramatic the overall situation is? An analysis of official statistics concerning Ukraine’s domestic and foreign debts, servicing them, implementing the budget revenue items, on the one hand, and the potentialities of the National Bank on the other, will leave one with a picture best described as critical. The state is likely to keep the situation under control for another month. Then what? Already July may see an unprecedented hryvnia landslide, starting another inflation spiral.
Even the author’s extra-intellectual “two directional orientation” toward “financial stabilization” fades against this somber background. The nation has grown accustomed, albeit unwillingly, to the administration’s vectored verbiage, veering about like a weather vane. Mr. Halchynsky delicately broaches the subject of Ukraine’s economy becoming chronically indebted (in terms of national budget liabilities), and his proposals are nowhere near realistic effective measures. He merely states that covering the budget deficit has acquired a more civilized form and that the classical debt pyramid is taking shape. Of course, no practical measures to correct the situation are mentioned.
It would be very interesting to know exactly what role the international financial institutions play in determining Ukraine’s economic policy. In a roundabout way the author answers this by stressing the importance of a rigid monetary policy, enhancing the hryvnia as, supposedly, the only way out of the current economic crisis. In a way, his position is understandable, as a functionary of the Presidential Administration he realizes better than anyone else that, should the IMF get really angry at Ukraine, the domestic financial situation would become totally uncontrollable, reaching its tragic climax earlier than anyone could have anticipated. However, Mr. Halchynsky’s argumentation sounds very interesting. He explains the need to uphold a rigid monetary policy, on the one hand, by protecting people’s incomes; on the other, by what he says will step up the investment process. If back wages lasting for months can be regarded as such protection, the only logical inference is that the Presidential Administration is fond of black humor. On the other hand, if such rigid monetary measures, fleecing every given enterprise as they are, are supposed to step up the investment process, one can immediately see why there is practically no foreign investment in Ukraine.
The proposed containment of inflation by way of increasing the economy’s monetarization could be an ideal college lecture for students majoring in economics. Trying to adjust this purely theoretical model to Ukraine’s degrading economy looks dubious. Mildly speaking.
Another curious passage deals with upholding the currency exchange rate, as of 1999 on a parity basis to the inflation rate. Here the stated assumption is that the hryvnia rate will remain in the appreciated currency mode. But this can only scare away potential investors. At the same time, Presidential Advisor Halchynsky (Ph.D.) writes that the inflation rate must be lowered to 8-7% in 1999. How can one tally this with the thesis of devaluating the hryvnia along with the inflation rate? Everyone knows that by lowering inflation the hryvnia will rise. In other words, the author is not likely to trust his own lower inflation slogans.
Talking of this voluminous article in general, one is tempted to identify its author as a phenologist, a retired one enjoying his well-deserved (hard-earned?) retirement, appearing now and then with his weighty observations making his happy readership even happier. There is no composite logic in this article. Also understandably so. Very likely what Mr. Halchynsky used were the remains of the President’s original message to Parliament, something the Administration would love to see presented in its original version.
Of course, there are positive aspects about this article. An expert scrolling this text will come up with most interesting findings on the President’s staff economists, specifically on how well they can put two and two together in today’s socioeconomic situation.