Ukraine government earmarks $2 billion in pre-election spending.
Ukrainian President Viktor Yanukovich announced $2 billion worth of pension increases and other handouts on March 7 as his Party of the Regions prepared for a tough parliamentary election in October.
The Regions, which dominate the current parliament together with allies, are being run close in opinion polls by the opposition Batkivshchyna (Fatherland) party amid a worsening economic climate.
Yanukovich said the government was increasing monthly payouts to 9 million pensioners by at least 100 hryvnias ($13) from May and would also boost other payouts such as those provided to disabled miners and retired military officers.
He also ordered 1,000 hryvnia ($125) reimbursements to be paid out to 6 million depositors of the Soviet Union’s Sberbank who had lost most of their savings as the Soviet rouble crashed in the 1990s.
These two steps will cost the state budget 16 billion hryvnias ($2 billion) this year, Interfax news agency quoted Deputy Prime Minister Sergei Tigipko as saying after the government meeting.
“The Finance Ministry has enough funds for this,” it quoted him as saying.
The IMF, back in talks with Ukraine after halting the flow of aid early last year, says that the government should rather hike gas and heating prices for households that are currently heavily subsidised by the state budget.
With talks with Russia on the price of gas also dragging on, and the interest rates Kiev pays to borrow from the private sector close to double digits, analysts say the country is badly exposed to any further international financial turbulence.
Yanukovich also ordered his cabinet on March 7 to set up a state mortgage programme that would allow Ukrainians to borrow money at 2-3 percent per annum, with the remainder of interest rate payments subsidised by the budget.
“The president has de facto launched the election campaign,” Pavel Rozenko, a political analyst with the Razumkov Centre think tank in Kyiv, said.
“These steps may result in a higher deficit of the state budget and the (state) Pension Fund as well as higher inflation.”
Yanukovich’s party holds 191 seats out of 450 in Ukraine’s parliament and faces stiff competition in the upcoming election from Batkivshchyna’s bloc, which currently holds 103 seats, and other opposition parties.
Last October, a Ukrainian court sentenced Batkivshchyna’s leader, former prime minister Yulia Tymoshenko, to seven years in prison on charges of abusing her power while forcing through a 2009 gas supply deal with Russia.
Tymoshenko has dismissed the charges as politically motivated, a view shared by the European Union which has put off the signing of bilateral agreements on political association and free trade over the issue.
Yanukovich narrowly beat Tymoshenko in the 2010 presidential election and polls indicate support for her rose as she was arrested, tried and convicted.
According to a poll carried out in February by the Kyiv International Institute of Sociology, only 26.3 percent of Ukrainians who were willing to vote would have voted for the Party of the Regions.
This was an improvement from 23.8 percent last November but still down from 31.9 percent a year ago and just over 34 percent when it won power in 2007. Changes to how parliament is elected make it hard to predict how many votes will be needed to win this time.
Batkivshchyna was second in the poll with 22.3 percent, up from 19.3 percent last November.
From her prison cell in the eastern city of Kharkiv, Tymoshenko called on her party faithful last month to join forces with other opposition parties to oust the Regions in October, although the prospects of such a union are unclear.