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17 June 1998
For immediate release
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On June 15, Ukraine's President Leonid Kuchma met with a group of leading Ukrainian bankers. Mr. Kuchma and the bankers discussed further development of the Ukrainian banking system, ways of raising the effectiveness of bank's credit operations, and of enhancing banks' role in attracting deposits from the population, as well as their role in the development of the Ukrainian securities market. The bankers stressed that the current legislation does not adequately protect bankers willing to grant credits. They also noted that the new parliament delayed consideration of important draft laws as a result of the parliament's inability to elect a speaker and begin its legislative activities. According to the Ukrainian leader, he will sign within the next few days several important decrees on tax and budget policies. Mr. Kuchma is to hold regular meeting with bankers on a monthly basis.


The Cabinet of Ministers has issued a press statement stressing the importance the Ukrainian government attaches to reformation of property ownership relations. According to the statement, privatization is one of the strategic aspects of economic reforms in Ukraine. However, only moderate success can be noted in this area. Last year's state privatization program provided for revenues totaling 550 million hryvnia from the sale of state assets but only about 80 million hryvnia was generated. The situation regarding this year's state privatization program has improved. The 1998 state privatization program provides for revenues totaling 1.1 billion hryvnia and over 133 million hryvnia was generated in the first quarter. However, in the second quarter, particularly in May-June, the situation deteriorated. Only 25 million hryvnia out of the projected 60 million hryvnia was generated in May, while only 4.7 million hryvnia have been generated as of June 12. The Cabinet of Ministers is particularly concerned over the slow pace of privatization via open auctions of such important state assets as power companies and grain elevators. The Cabinet of Ministers statement blamed the slow pace of privatization on the State Property Fund's ineffective personnel policy and management and called upon the parliament to grant the Cabinet control over the State Property Fund to facilitate quick decisions and better organization of privatization auctions, objective and timely auditing, and organization of pre- and post-privatization support for enterprises. The Cabinet statement warned that if the current approach to privatization is not changed, the government may not be able to generate the budget revenues required to finance various social projects, and the country may miss the chance to attract investments to develop the domestic industry.


The Cabinet of Ministers approved the creation of the state-owned Coal Ukraine company. All loans intended for miners and payments for coal are expected to be channeled through Coal Ukraine. Coal Ukraine will also facilitate coal mining and control its quality. According to Ukrkoks Director-General Anatoliy Starovoyt, Coal Ukraine is also expected to regulate the quality of coking coal imports from Poland and Russia. A total of 1,939,000 tons of imported coal (39.8% of plan) was supplied to Ukrainian coke factories in the first five months of 1998. Ukrainian mines supplied to coke factories 8,225,000 tons of coal (148% of plan). Coal imports cannot be completely discontinued because Polish and Russian coals have lower sulfur content: 1% or less compared with 2% or more in Ukrainian coal.


An International Monetary Fund mission started a one-week review of Ukraine's reform efforts on June 15, according to reports by DINAU. Ukraine, facing a cash crunch due to rising domestic debt and unpaid wages and pensions, is seeking a new three-year, EFF loan of about $2.5 billion from the IMF. To be eligible for the loan, Ukraine must fulfill 92 conditions, including cutting the budget deficit to 2.5 percent of gross domestic product in 1998, accelerating privatization, and implementing structural reforms, before the IMF agrees to release money. Ukraine's Finance Minister Ihor Mitiukov told a news conference on June 12, that the Cabinet of Ministers had implemented all the measures it could.


On June 17, a World Bank delegation led by Paul Siegelbaum, the bank's director for Ukraine and Belarus, held talks in Kiev to update the WB project portfolio for Ukraine. According to official sources in Kiev, the World Bank's updated strategy will contain clear-cut priorities of further cooperation with Ukraine. There are good grounds to believe that they will include further financial support for fostering agricultural privately-run businesses and the entire private sector, though power industry projects and municipal development programs are expected to remain the World Bank's focal areas of attention, too. The WB's strategy for Ukraine is expected to gradually shift from systemic to investment projects. If the talks in Kiev prove a success, a relevant document will be considered and likely endorsed by the World Bank's Board of Directors before 1998 elapses. As a result, Ukraine will be in position to count on the World Bank's financial crutch to the tune of 4.2 billion US dollars well into the year 2001. The World Bank's delegation is to meet with Ukrainian Prime Minister Valeriy Pustovoitenko on June 18.


On June 17, the 3d International Conference on "Ukraine's stock market" opened in Kiev. In his remarks, Oleg Mozgovy, Chairman of the State Commission for Securities and Stock Market, referred to Ukraine's stock market as a major tool in implementing Ukraine's economic reforms. As Mr. Mozgovy said, the emerging stock market's informational openness and transparency is a key factor of its further evolution. In his opinion, presently the Ukrainian stock market is dominated by state-owned entities in the process of denationalization and privatization. As of April 1, 1998, these issued stocks worth 12,208 million hryvnias. He stated the number of subjects of business activity entitled to participation in privatization tenders at 945 (including 168 non-state-owned banks and 538 joint-stock companies). As Mr. Mozgovy admitted, there have been quite a few problems in the Ukrainian stock market's establishment process, primarily due to lack of understanding of the State's regulatory role in the stock market's performance. He urged prompt legislative steps involving taxes on stock market operations and protection of investors' rights. As Mr. Mozgovy said, the mechanism for declaring bankruptcy should be specified in a more clear-cut mode.

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