Ukrainian Economic Reforms: Reflections on the Past and the Future

This is the second of two statements, at the conference in Kyiv in May 1994, on which this volume is based, by leading Ukrainian reformers. Victor Pynzenyk, Vice-Prime Minister for Economic Policy and Minister of Economics from August 1992 to August 1993, called for resolute and committed action on reform. People are now willing to undergo a single session of shock therapy rather than eke out a shocking existence for years without any therapy. It is imperative that both the growth rate of the money supply and the size of the budget deficit be dramatically reduced. It is also time to undertake large-scale privatization; even many directors of state-owned enterprises now support privatization. The government could overcome public resistance to its privatization programme by using the proceeds from privatization to implement social security programmes. The least protected people (i.e. pensioners, invalids and children) should receive targeted money allowances from the state if their incomes are below the minimum living standard. Administrative price controls generate strong pressures for subsidies, breed a consumption-oriented mentality, and foster black-market activities. It is therefore vital that prices and international trade be liberalized. The state must now implement institutional reforms to set limits on the functioning of various bodies, to specify the 'rules of the game', to create a climate conducive to business activity, and to elaborate a clear legislative framework within which it may intervene in economic life.