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UPDATE 1-Ukraine '08 budget deficit may go uncovered - PM

Published 12/24/2008, 08:28 AM
Updated 12/24/2008, 08:30 AM

(expands, adds comments by presidential aide)

KIEV, Dec 24 (Reuters) - Ukraine's 2008 budget deficit may go uncovered because of a lack of available funds, Prime Minister Yulia Tymoshenko said on Wednesday.

An aide to President Viktor Yushchenko, the prime minister's arch rival, criticised her proposed 2009 budget, due to go before parliament on Thursday. He said the budget figures were "embellished" and could not be fulfilled.

Ukraine is increasingly in the grip of the world financial crisis, with thousands in the key steel industry already on unpaid leave and the national currency sustaining big losses on the interbank market.

Tymoshenko told a news conference that the central bank, with which she is also at odds, had declined to refinance banks that were in a position to help cover the 2008 deficit.

"The central bank has refused to refinance banks which had agreed to provide credits for the planned state budget deficit by the end of the year," she said. "This places us on the brink of failing to implement the budget."

The planned 2008 deficit stands at 25 billion hryvnias ($3.2 billion), or about 2.5 percent of GDP. The deficit for 2009 has been set at 2.96 percent, despite an IMF requirement for a deficit-free budget as a condition for a $16.4 billion loan.

The government had hoped to borrow 10.77 billion hryvnias on the domestic market for 2008 and a further 7.4 billion on foreign markets, but the global financial crisis had prevented attempts to raise a Eurobond.

Tymoshenko issued a new call for Yushchenko to step down "of his own accord" and said the president should sack central bank chairman Volodymyr Stelmakh.

"I demand that the president of this country immediately dismiss the head of the central bank," she said.

The president's top economic aide, Oleksander Shlapak described the proposed 2009 deficit as unacceptably high and said he would propose talks with the International Monetary Fund on re-examining conditions for the loan granted in November.

"The document signed with IMF has one significant difference from previous ones in that the Fund says it is ready to discuss any request from Ukraine in terms of revising the parameters of the programme," he said.

He said the government's forecast for 0.4 growth in domestic product was at odds with an Economy Ministry forecast of a 5.0 percent decline.

"I believe what we have here is quite simply an embellished picture," he said. "We have at least 18 billion hryvnias in revenue simply added in."

The 2009 budget provides for borrowing 88.7 billion hryvnias (more than $11 billion), including 69.94 billion on the domestic market and 18.81 billion on foreign markets.

Shlapak said the grounds for raising such sums were placed under a "big question mark". ($=7.79 hryvnias)

(Editing by Ron Askew)

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