Kyiv, January 21, 2015. The most crucial reform in Ukraine is the creation of an environment that could facilitate fiscal consolidation. This would enable public administration reform, fight corruption effectively and improve the business climate in Ukraine. Ivan Miklos, MP and the former Minister of Finance of the Slovak Republic, told this during the press-briefing at Ukraine Crisis Media Center.
Ivan Miklos conducted a round of meetings with the Prime Minister of Ukraine, Ministers of the Economy, Finance, Transport and Agriculture, as well as Chief Executive Officer of “Naftogaz” and the Head of Ukraine’s Fiscal Service. “I was positively impressed by the professionalism and education of the heads of executive bodies,” Mr. Miklos said.
The former Minister of Finance of Slovakia emphasized that Ukrainian government should make financial consolidation its paramount purpose. The state has to radically cut its expenses to devise a state budget without deficit. For instance, ministries should cut their staff numbers; a share of the money saved could be redistributed to increase salaries for key experts and managers. “When I became the Minister of Finance of Slovakia in 2002, I have cut my ministry by 30%,” Ivan Miklos told.
Secondly, energy subsidies, especially those on natural gas, should be cancelled. “The difference between subsidised prices for the consumers and a much higher market price creates a huge source of corruption,” Ivan Miklos explained. Price liberalisation and cutting the number of regulatory bodies may not only liquidate corruption, but also help to tackle problems in the banking sector and improve the overall business environment.
Slovakia’s former Finance Minister mentioned Ukraine’s excessive spending on retirement benefits. Ukraine spends 16% of its GDP on pensions, while Poland and the Baltic States spent not more than 8-10%. Cutting benefits to former public officials and raising the retirement age might solve the problem. “Raising of retirement age is a very unpopular decision, however, it is inevitable. Every country that successfully moved from the planned economy to the market one went through this,” Mr. Miklos concluded.
Ivan Miklos is a member of a group of foreign experts who consult the Government of Ukraine on economic reforms. Among other members are Andrius Kubilus, former Prime Minister of Lithuania, Mikuláš Dzurinda, former Prime Minister of the Slovak Republic, a renown economist Anders Åslund, George Washington University professor Oleh Havrylyshyn and Dr. Basil Kalimon, professor at the Ivey business school (Ontario, Canada).