Ukraine leader takes a shot at gov’t over economy

Ukraine’s President Viktor Yushchenko and his aides on Tuesday accused Prime Minister Yulia Tymoshenko’s government of mismanaging the economy and called for top-level resignations.

The president’s chief-of-staff said Tymoshenko’s team had failed to come to grips with “negative trends” in the economy, a clear reference to soaring inflation. Yushchenko also cancelled government plans for a major privatization, the latest in a series of blows aimed at her cabinet. “The serious economic problems which the country has experienced in the Q1 of this year raise questions about the responsibility of the cabinet led by Yulia Tymoshenko for its inability to react properly to economic demands,” chief-of-staff Viktor Baloga said in a statement. “Ministers who have failed to cope with negative trends, have proposed no timely market instruments of reaction and should cease working in their posts.” He did not name any specific ministers in Tymoshenko’s government, which has been in place since December.

Economy minister Bohdan Danylyshyn is a relatively unknown academic. Finance Minister Viktor Pynzenyk is a veteran reformer, who has championed the free market since the mid-1990s. The government says it inherited high inflation from its predecessor. Price rises of 9.7% in the Q1 exceeded a government full-year forecast of 9.6%. Year-on-year in March inflation rose to over 26%. Central bank chairman Volodymyr Stelmakh last week said government policies were leading to stagflation. Ministers say they are doing everything to curb inflation, on the rise since a poor 2007 harvest. But it has also increased wages and paid compensation for lost Soviet-era savings.

YUSHCHENKO vs TYMOSHENKO

Compensation levels will depend on privatization revenues, but government efforts have been stalled by Yushchenko’s cancellation of the sale of the Odessa Port chemical plant, with a starting price of almost $600 million. A presidential decree last week cancelled the sale of four regional electricity producers. In both cases he said the sell-offs of key industry sites were unconstitutional. Yushchenko and Tymoshenko stood side by side during the 2004 “Orange Revolution” protests that swept the president to power. But he sacked her as his first premier after seven months and is wary of her presidential ambitions. The pair have clashed over the head of the privatization agency, sacked by Tymoshenko but reinstated by the president. Valentyna Semenyuk, head of the agency, said last month that all planned sell-offs, including fixed-line operator Ukrtelekom, should be suspended pending the introduction of new rules. Ukrtelekom has a starting price of $2.4 billion, and the government hopes it may may fetch as much as $7 billion.

The budget, drafted by Tymoshenko’s predecessor, calls for much lower privatization revenues of $1.7 billion. Last year, privatization generated $485 million against a target of $2.1 billion as infighting and court cases delayed several sales. Presidential aide Valeriy Lytvytsky said on Tuesday he saw economic growth slowing this year to 5.5-6.5% against 7.6% last year, below a government target of 6.8%. Data released by the State Statistics Committee on Tuesday showed the economy grew 6% in the first three months of the year, against 8% in the same period last year.

Reuters, BBJ