Viktor Pynzenyk: 'Nothing can be predicted in Ukraine'

One of the most delicate and important links in the structure of the state - finance - is the responsibility of Lviv native Viktor Pynzenyk. His ministry always has many questions, especially during reforms. Perhaps not as quickly as one would like, but changes are indeed happening. The minimum wage is increasing, but the cost of living is also rising. The budget, although it does not satisfy everyone, does not create additional debts. However, many problems remain. Viktor Pynzenyk, who has worked at key levels of power since 1992, spoke to "Postup" about the roots of those problems and how to avoid them.

- Mr. Viktor, since 1992 you have held the highest positions in Ukraine in the economic sphere. So which launched mechanisms started working, and which ones failed to be implemented?

- I don't keep chronologies. I have been engaged in analytics and can discuss many moments, but I never dwell on the past. I turn to it only so as not to make mistakes in the future.

Overall, I am not satisfied with many things. Perhaps because I have a very high bar of requirements and aspirations. I see that the country needs very serious treatment. Unfortunately, for quite a long time the necessary treatment measures that were talked about were postponed. Last year a certain package of such decisions was made, which gave very good results. This concerns uniform taxation rules. We obtained a result that Ukraine, I am confident of this, will never repeat on such a scale. With insignificant economic growth, Ukraine received a phenomenal increase in budget revenues, and this with unchanged tax rates! But before us there is still an unstarted expanse of work.

- You say that our state needs treatment. And what exactly needs to be resuscitated first of all?

- Just the list of measures that I could propose would take dozens of pages. In the Ministry of Finance, like nowhere else, it is visible that the country is sick. It became sick not today, but long ago, because almost nothing was done. Everyone lived from election to election, just to survive the elections, and therefore a great many troubles accumulated. We can see this in the example of one problem that was generated in 2004 - the deficit of the Pension Fund. We can forget about any serious pension reforms, I mean the transition to a new philosophy of pension provision, until we get out of this deficit. This is already the second year in a row that we are trying to solve it.

The problem is rooted in the fact that the minimum wage was set lower than the pension, and pension payments could not be made without serious subsidies from the Pension Fund. The pension has actually broken away from its base. It depends on anything but length of service and salary. Serious pension distortions have formed and deepened. The Pension Fund was deprived of its revenue base - a growing salary. These two problems alone are very serious and require many systemic actions, but such problems can be named by the dozens and hundreds.

- You spoke in the Verkhovna Rada, warning about the risks that arose in the budget. What are the biggest risks that remain?

- The budget is put together like a balance. From the point of view of balance, the budget can be executed. But it is a pity that not everything we planned was approved. The 2006 budget envisaged several important points. First, the deficit was filled with one-time expenditures. This did not create problems for the future and did not cause the need to live on debt in the future. We are also very concerned about the energy-saving program, of which little remains. We were launching a restoration program on a large scale, which made it possible to engage energy-saving mechanisms, and moreover we wanted to launch this "fan-like" through a large number of banks. Our list of banks was restricted, and this will limit the deployment of this program. We also wanted to take a more decisive step in reducing taxes. Unfortunately, parliament adopted a truncated decision. Moreover, in all such parts: payroll fund charges, currency purchase levy, customs duty.

- This year an increase in the minimum wage to 400 hryvnias is planned, and the cost of living to 500. How are these figures formed and when can they realistically coincide in Ukraine?

- I would gladly sign a decision today on a minimum wage of 10,000 hryvnias. And I think that in Ukraine the minimum wage will indeed be higher than the cost of living. We are approaching this step by step. The percentage of the minimum wage to the cost of living is constantly growing. But if I write 10,000 hryvnias, it would be a deception of society, because the country is not yet able to provide such a figure. Today we do not receive that much revenue to the budget.

As for the calculation itself, it is standard. The initial data for calculating the cost of living are a set of goods and their prices.

- Do Ukrainian citizens have a chance to receive their savings? What is being done in this direction and what are the forecasts regarding the period when people will receive compensation?

- The amount of debt is about 130 billion. And this is a burden on the budget, not on the banks. Banks have nothing to do with this problem. Hence the conclusions follow: we can take steps in this direction, but this is not a one-year problem. As for a more far-sighted forecast, I assure you that nothing can be forecast in Ukraine. As long as the policy of the "last budget night" operates, in Ukraine it will be impossible to make not only a three-year forecast, but even a one-year one - it will be impossible to foresee anything.

- What do you mean by "last budget night"?

- We can calculate everything five years ahead. However, not everything is so simple. If the Ministry of Finance submits the final budget document, and it undergoes significant changes, and even on the figures for energy saving we allocated one billion two hundred, but only three hundred eighty million remained, then no strategic perspective can be calculated. Of course, one can calculate, but that does not mean that those calculations will be reflected in the documents that become the norm of law.

- Not long ago the President spoke about amnesty of capital. What is needed to implement it?

- To approve the law.

- The Ministry is intensifying work on mechanisms for detecting contraband... What exactly is meant?

- Last year an excellent result was obtained in the fight against contraband. 75 percent of the revenue increase was provided by customs. That is, revenues almost doubled. Moreover, I want to emphasize that no new taxes were introduced, and existing rates were not raised. This growth is connected with the fact that less stealing began. The volume of thefts was reduced by uncovering various schemes of tax evasion. We feel that now this is not enough. There are reserves, and we have many reports that there are still problems. So we are looking for tools to solve them.

One of such tools is an appeal to finance ministers of various countries with a proposal to exchange information monthly regarding customs clearance of goods at two adjacent customs offices. Take, for example, the customs office on the Ukrainian side and the Polish one. We provide them with customs statistics data for any ten days, and at our side's request they give us the same information. We reconcile what passed through the Polish border and what was recorded by customs clearance on the Ukrainian side. We want to see through which particular customs office "gray" or "black" contraband is seeping. And this week, through the Ministry of Foreign Affairs, we will send the relevant letters.

To illustrate the problem, I will give this example: we were provided with information that the average price for clearance of women's tights is 7.5 hryvnias per kilogram. I specifically consulted with my wife about the minimum and maximum price of a pair of tights, and I think it is not hard to understand how many pairs of tights are in a kilogram and whether such a price is not a way of avoiding taxation. And this hits the country twice, since it strikes producers of the relevant products, who find themselves in non-competitive conditions with imports, and, secondly, it hits budget revenues. Therefore we are now conducting a special analytical study on commodity positions and want to arrive at balances for certain goods. Because something is not right with our balances: we consume significantly more than we import, plus our own production. Goods are seeping in from somewhere, and we want to understand from where.

- What difficulties do you most often encounter in the position of Minister of Finance?

- It is easier to say which ones I do not encounter. If I wrote down all the difficulties, I would not be able to work, since there would not be enough time. Problems arise every day. There is not an hour without some troubles. However, I want to emphasize that if it were not for the tough position of the Ministry of Finance, to a significant extent it would not have been possible to maintain the budget balance last year, and we finished it with an excellent result - two percent deficit, and this is significantly less than planned. Also last year we did not create "surprises" for the citizens of Ukraine. We reduced Ukraine's state debt by seven billion hryvnias, that is, by six percent of gross domestic product. And this is also a good result.